Book ValueBook value per share represents the equity a common stockholder has in the net assets of the corporation from owning one share of stock. Remember that the net assets of a corporation must be equal to total stockholders' equity. Therefore, the formula for computing book value per share when a company has only one class of stock outstanding is:Book Value per Share = Total Stockholders’ Equity / Number of Common Shares Outstanding.Book value per share is useful in determining the trend of a stockholder's per share equity in a corporation. It is also significant in many contracts and in court cases where the rights of individual parties are based on cost information.Book value generally is based on recorded costs.Market ValueBook value per share generally does not equal market value per share. Market value reflects the subjective judgments of thousands of stockholders and prospective investors about a company's potential for future earnings and dividends.
This is the end of the preview.
access the rest of the document.