Book Value Per Share Formula (Table of Contents)
- Book Value Per Share Formula
- Book Value Per Share Formula Calculator
- Book Value Per Share Formula in Excel(With Excel Template)
Book Value Per Share Formula
Where,
- Total liabilities
Total liabilities are the total debt and financial obligations payable by the company to organizations or individuals at any defined period of time. Total liabilities are stated on the balance sheet by the company.
- Total Assets
Total Assets are the total amount of assets owned by an entity or an individual. Assets are items of monetary value, which are used over time to produce a benefit for the asset’s holder. In case of the owners of Assets are a company then these assets are stated in the balance sheet for the accounting records.
Examples of Book Value Per Share Formula
Let’s take an example to find out the Book Value Per Share for a company: –
Book Value Per Share Formula – Example #1
Let’s assume Company Anand Pvt Ltd have worth $25,000,000 of stockholders’ equity, $5,000,000 preferred stock, and total outstanding shares of $10,000,000 shares outstanding. We need to calculate the book value per share for the Anand Group of companies.
Now, we can calculate Book Value Per Share for Anand Pvt Ltd by using the Book Value Per Share Formula:
- Stockholder’s Equity = $25,000,000
- Preferred Equity = $5,000,000
- Total Outstanding Common Shares = $10,000,000
By using the Book Value per Share Formula
- Book Value per Share = (Shareholders’ Equity – Preferred Equity) / Total Outstanding Common Shares
- Book Value per Share = $(25,000,000- $5,000,000) / $10,000,000
- Book Value per Share = $2
This shows Anand Group of a company have the book value per share of $2.
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Book Value Per Share Formula – Example #2
Jagriti Group of Companies have the following details as per its financials for the year ended 2017-18:
- Total assets = $200,000
- Total liabilities = $50,000
- Preferred shares = $25,000
- Number of outstanding common shares = 5000 shares
Therefore,
Now, we need to calculate the Book Value Per Share of Jagriti Group of Companies.
As we can see in the above case the Shareholder’s Equity is not provided, then we have to calculate Shareholder’s Equity by the using the below formula:
- Total assets = $200,000
- Total liabilities = $50,000
Shareholder’s Equity Formula
- Shareholder’s Equity =Total assets – Total Liabilities
- Shareholder’s Equity = $200,000 – $50,000
- Shareholder’s Equity = $1,50,000
Now, we have to calculate how much common shareholders will be getting from the shareholders’ equity. So, we have to deduct the Preferred stocks from the Shareholders ‘equity.
Therefore,
Common shareholders’ equity = Shareholder’s equity – Preferred Share
- Common shareholder’s equity = $1,50,000- $25,000
- Common shareholder’s equity = $1,25,000
Now by using the below formula, we can calculate Book Value Per Share:
Book Value per Share = (Shareholders’ Equity – Preferred Equity) / Total Outstanding Common Shares
- Book Value per share = $1,50,000- $25,000/ 5,000
- Book Value per share = $1,25,000/ 5,000
- Book Value per share = $25
Book Value per share of Jagriti Group of Companies is $25
Book Value Per Share Formula – Example #3
Calculate the Book Value per share for Anand Group of Companies using the following extracts available:
- Current Assets = $70,000
- Non-current Assets = $230,000
- Current Liabilities = $60,000
- Non-Current Liabilities = $30,000
- Preferred shares = $45,000
- Number of outstanding common shares = 3500 shares
For calculating Book Value Per Share, we need Shareholders’ Equity which can be calculated as below:
- Total assets = Current Assets + Non-current Assets
- Total Liabilities = Current Liabilities + Non-Current Liabilities
Shareholder’s Equity =Total assets – Total Liabilities
- Shareholder’s Equity = (Current Assets + Non-current Assets) – (Current Liabilities + Non-Liabilities)
- Shareholder’s Equity = ($70,000 + $230,000) – ($60,000 + $30,000)
- Shareholder’s Equity = $3,00,000 – $90,000
- Shareholder’s Equity = $2,10,000
Now by using the below formula we can calculate Book Value Per Share:
Book Value per Share = (Shareholder’s Equity – Preferred Equity) / Total Outstanding Common Shares
- Book Value per share = ($2,10,000- $45,000)/3500
- Book Value per share = $47.14
Book Value per share of Jagriti Group of Companies is $47.14.
Explanation
The book value per share can be used for calculating the per share value of a company. The calculation is based on the equity available to common shareholders after paying off the debts and preferred shareholders for the which the company is legally obliged. So even in the Book Value Per Share preferred shares are deducted from Shareholder’s Equity.
“Book Value” of a company is also called as Shareholder’s Equity, Owners Equity. It can be calculated by deducting Total Liabilities from Total Assets.
Therefore, Shareholder’s Equity =Total assets – Total Liabilities
And, Book Value per Share = (Shareholders’ Equity – Preferred Equity) / Total Outstanding Common Shares. The above-mentioned data can be found on the balance sheet of the company.
Significance and Use of Book Value Per Share
Book Value per share can be used by the investors for determining the equity in a company comparative to the current market value of the company, that is the current price of the stock. For example, Let’s assume Anand Ltd is currently trading for $30. But it has a book value of $15. This shows the stock of Anand Ltd is selling at double I.e. 2 times of its equity. The above example is used in valuation methodology i.e. Multiple Valuation (price to book value or P/B) or relative valuation, in this formula book value per share is used in the denominator. The current market price of the stock reflects the growth potential of the stock in contrast to its Book Value. Book value per share can be used in the relative valuation of companies. Price to Book value ratio which is also noted as P/B, Value of common stock of Company can be determined by using its book value per share or by the Company B’s price to book value ratio or the industry ratio.
Book value per share can also be used in calculating the return on equity formula, which is also denoted as ROE. This is the case when ROE is being calculated on a per share basis.
ROE can be calculated by dividing stockholder’s equity from net income. ROE per Share = (Net Income Per share or EPS)/Book Value per share. Per share basis of Net income is referred to as Earnings per share or EPS. As shown above, in the article, book value per share is expressed on a per share basis of stockholder’s equity.
Book Value Per Share Calculator
You can use the following Book Value per Share Calculator
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| Total Outstanding Common Share's | |
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Book Value Per Share Formula in Excel (With excel template)
Here we will do the same example of the Book Value per Share in Excel. It is very easy and simple. You need to provide the two inputs i.e Shareholders’ Equity and Preferred Equity
You can easily calculate the Book Value per Share using Formula in the template provided.
In, this template we have to solve the Book Value per Share formula
Hence first, we are calculating the Shareholder’s Equity by using the of Shareholder’s Equity Formula.
Now, we are going to calculate the Book Value per Share by using the Formula
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This has been a guide to Book Value per Share Formula, here we discuss its uses along with practical examples. We also provide you with Book Value per Share calculator along with downloadable excel template.
