Book value per share
Book value per share - definition & calculation
In other words, it refers to the assets as they are recorded in the books and, more specifically, to the company's own assets. With the book value per share, this amount is broken down to the individual security. The ratio is also known as book value per share or BVPS.
As with many other figures in the analysis of companies, the book value per share serves primarily as a rough initial assessment of the financial situation and development. One can determine what potential a share has and, more importantly, another calculation can be opened up in addition to this assessment: that of the price-to-book ratio KBV. It takes into account the relationship between the balance sheet value and the current purchase price of the respective securities. Possible under- and overvaluations of shares become visible.
What is the book value?
The book value in general is in principle nothing other than the fixed assets of a company in the balance sheet. This is the same for an AG as for a GmbH. Here you can find all values in the form of liquid assets as well as real estate, reserves and tangible assets. This makes it clear how much potential there is in the company as a whole. However, one should also try to distinguish which financial assets are fixed and which correspond to the available cash flow.
The disadvantage of book value is that it can sometimes be misleading. It is difficult to tell from the pure ratio how capable the company actually is of acting. The operating value - that is, the money that the group can use directly for investments - must be determined separately. Finally, it must be taken into account that some tangible assets cannot be sold quickly or are even essential for the business.
This is how you arrive at the book value per share: Calculation
In simple terms, the book value per share is calculated by dividing the book value of the total fixed assets inypur exness portfolio by the number of shares. So you first take the value from the balance sheet and then find out how many outstanding shares there are. The formula for calculating the book value per share is then as follows:
Book value per share = (equity - preference capital) ∕ number of shares outstanding.
Shares outstanding
The number of outstanding shares is all securities that are available on the how to trade stock market, i.e. do not belong to the equity capital of the public limited company. It therefore concerns shares that are not owned by the corporation itself.
Preferred capital
Preferred capital is the value that is distributed as an extra to investors with preferred shares. This amount must be deducted from the equity to arrive at the total book value per share.
Since the book value of the company is the equity capital from the balance sheet, the debt capital must be subtracted from the complete balance sheet total. This includes, for example, possible liabilities entered by external business partners. Overall, one can also speak of the book value per share as equity divided by the number of outstanding shares and thus of equity per share.
Since this ratio is heavily dependent on accounting, it is not necessarily about actual assets and certainly not about cash and cash equivalents. The book value is indeed meaningful to a certain extent. However, as with other ratios on the stock market, valuation always depends on other factors and comparisons.