BVPS

BVPS
   Book Value Per Share. Book value equals total assets minus total liabilities. Book value per share (BVPS) equals book value divided by the number of shares outstanding. It is the same as shareholders' equity.
   BVPS is used in the calculation of the price/book ratio (share price divided by BVPS). Price/book is the ultimate measure of how much investors think a company's assets are worth. A price/book ratio should be higher than one; otherwise the market is pricing the assets below their replacement value. Companies with price/book ratios well below one automatically become takeover targets, as sector rivals will consider launching a bid for their stock rather than investing in new plant and equipment. Price/book is especially relevant for capital-intensive manufacturing firms. Service industry companies with few fixed assets typically trade at high price/book ratios.
   Formula for BVPS: (Assets - Liabilities)/Number of shares outstanding.
   Formula for price/book ratio: Share price/BVPS. Example
   The Old Rope Corporation has total assets of £1,407 million and total liabilities of £1,260 million. The difference, £147 million, is Old Rope's book value, which is also known as net asset value or shareholders' equity.
   Book Value = 1,407 - 1,260 = 147 million
   Book Value Per Share = 147 million/350 million shares
   outstanding = £0.42
   Share price £1.50
   Price/book ratio: 1.50/0.42 = 3.57
   ► See also Assets.

Financial and business terms. 2012.

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