Book value per share is an important financial metric that investors use to evaluate a company’s worth. It is the amount of money that would be returned to shareholders if all of the company’s assets were sold and all of its debts were paid off. In this article, we’ll take a closer look at how to calculate book value per share.
What is Book Value?
Book value is a company’s total assets minus its total liabilities. In other words, it’s the company’s net worth on its balance sheet. The book value of a company is an important metric for investors because it provides a snapshot of the company’s financial health and can be used to assess the value of the company’s stock.
How to Calculate Book Value Per Share
To calculate book value per share, you need to know two pieces of information: the company’s total equity and the number of outstanding shares of stock.
Total Equity
To find the company’s total equity, you’ll need to look at its balance sheet. The balance sheet will show the company’s assets, liabilities, and equity. The equity section will include the company’s common stock, retained earnings, and any other equity accounts. Add up all of these accounts to get the total equity.
Outstanding Shares
To find the number of outstanding shares, you can look at the company’s financial statements or check with a financial data provider like Yahoo Finance or Google Finance. The number of outstanding shares represents the total number of shares of stock that have been issued by the company and are currently held by investors.
Once you have both pieces of information, you can calculate book value per share using the following formula:
Book Value Per Share = Total Equity / Number of Outstanding Shares
For example, let’s say that a company has a total equity of $500 million and 100 million outstanding shares of stock. To calculate the book value per share, you would divide the total equity by the number of outstanding shares:
Book Value Per Share = $500 million / 100 million = $5 per share
This means that the company’s book value per share is $5, which is the amount that would be returned to shareholders if all of the company’s assets were sold and all of its debts were paid off.
Book value per share is an important metric that investors use to evaluate a company’s worth. By calculating the book value per share, investors can assess the value of the company’s stock and make informed investment decisions. To calculate book value per share, you need to know the company’s total equity and the number of outstanding shares of stock. Once you have both pieces of information, you can use a simple formula to calculate the book value per share.