What Is Book Value Per Share With Example

The book value of a company stripped to basics is the value of the company the stockholders will own if the firm s.

What is book value per share with example. This article is focused on its calculation. This makes sense because equity represents the net assets of a business. In the case that the firm dissolves it is the amount the shareholders will receive.

One of the main ways of increasing the book value per share is to buy back common stocks from shareholders. Using the previous example assume that the company repurchases 500 000 common stocks from its shareholders. Book value per share is usually used to compute the value or price per share of a company s stock during liquidation.

Some stockholders have keen interest in knowing the book value of the shares they own. It will reduce the current shares outstanding to 2 5 million 3 000 000 500 000. The information needed to calculate bvps is found on a company s balance sheet.

Book value per share is a ratio that compares the net asset value of a company minus preferred equity to the total number of common shares available on the market. If all of the assets were sold off and all of the liabilities were paid off the shareholders would be left with the equity. It is the amount that shareholders would receive if the company dissolves realizes cash equal to the book value of its assets and pays liabilities at their book value.

Book value per common share or simply book value per share bvps is a method to calculate the per share book value of a company based on common shareholders equity in the company. The revised bvps will be as follows. Book value per share bvps is a ratio used to compare a firm s common shareholder s equity to the number of shares outstanding.

Book value per share is a fairly conservative way to measure a stock s value. Example of how to use book value of equity per share assume for example that xyz manufacturing s common equity balance is 10 million and that 1 million shares of common stock are outstanding. Comparing bvps to a stock s market price could help value investors find opportunities.