Book Value

Book Value is equal to Total Assets minus Liabilities. Book Value per Share can be used to value a company in the very early stages of development using the ratio, Price / BPS.

The company’s Shareholder’s Capital is the Book Value, which can be expressed on a per share basis. The Book Value of a Company is calculated by subtracting the Liabilities net of Shareholder’s Capital from Total Assets on the Balance Sheet. The Book Value can then be divided by the weighted average number of shares outstanding to have the value on a per Share Basis, known as BPS. The Book Value is a Balance Sheet valuation as compared to other per share items such as EPS from the P&L. Book Value per Share can be used in a Price Ratio Formula = Price / BPS. BPS is less used in valuing a company. The exception is when a Company is in the very early stage of development with no Sales. Thus no earnings.