Home>Finance>Book Value Per Share (BVPS): Definition, Formula, How To Calculate, And Example  Finance

# Book Value Per Share (BVPS): Definition, Formula, How To Calculate, And Example

Discover the finance term Book Value Per Share (BVPS) and learn its definition, formula, calculation process, and get an example to understand its practical application.

# Book Value Per Share (BVPS): Definition, Formula, How to Calculate, and Example

Have you ever wondered how much a company’s shares are really worth? Understanding a financial metric known as Book Value Per Share (BVPS) can give you valuable insights into a company’s financial health. In this blog post, we will explore the meaning of BVPS, explain its formula, provide step-by-step instructions on how to calculate it, and offer a practical example to help illustrate its importance.

## Key Takeaways:

• Book Value Per Share (BVPS) is a financial metric used to assess the per-share value of a company’s equity.
• BVPS is calculated by dividing a company’s total shareholders’ equity (excluding preferred stock) by the number of outstanding common shares.

## What is Book Value Per Share (BVPS)?

Book Value Per Share (BVPS) is a fundamental financial metric that represents the equity attributable to each outstanding common share of a company. In simple terms, it is the value each share would be worth if the company were to liquidate its assets and settle all outstanding liabilities.

BVPS provides clues about a company’s financial health, particularly in terms of the net worth it has generated over time. Comparing a company’s BVPS to its market price per share can also shed light on whether the stock is overvalued or undervalued in the market.

## How to Calculate Book Value Per Share (BVPS)

The formula to calculate BVPS is straightforward:

BVPS = (Total Shareholders’ Equity – Preferred Stock) / Number of Outstanding Common Shares

To calculate BVPS, you’ll need two key inputs:

1. Total Shareholders’ Equity: This represents the net assets of the company after deducting liabilities. It includes common equity and retained earnings but excludes preferred stock.
2. Number of Outstanding Common Shares: This refers to the total number of common shares issued by the company.

Once you have these inputs, you can use the formula above to calculate BVPS.

## Example: Calculating Book Value Per Share (BVPS)

Let’s consider a hypothetical company, ABC Corporation. We will assume the following financial data for ABC Corporation:

• Total Shareholders’ Equity: \$1,000,000
• Preferred Stock: \$100,000
• Number of Outstanding Common Shares: 100,000

Using the formula mentioned earlier, we can calculate the BVPS for ABC Corporation:

BVPS = (\$1,000,000 – \$100,000) / 100,000

Simplifying the calculation further:

BVPS = \$900,000 / 100,000

Thus, the Book Value Per Share (BVPS) for ABC Corporation is \$9.00.

## Wrap Up

Understanding Book Value Per Share (BVPS) provides investors with valuable insights into a company’s financial standing and its per-share equity value. By comparing BVPS to the market price per share, investors can assess whether a stock is overvalued or undervalued in the market.

Key Takeaways:

• Book Value Per Share (BVPS) is a financial metric used to assess the per-share value of a company’s equity.
• BVPS is calculated by dividing a company’s total shareholders’ equity (excluding preferred stock) by the number of outstanding common shares.

Next time you analyze stocks or evaluate a company’s financials, make sure to consider the Book Value Per Share (BVPS) metric and its implications. Incorporating this important metric into your financial analysis toolbox will help provide a more comprehensive perspective on a company’s intrinsic value.

• https://livewell.com/finance/book-value-per-share-bvps-definition-formula-how-to-calculate-and-example/