Monday, December 04, 2006

What is Book Value In Stock Market

Book Value is the shareholders' equity of a business (assets - liabilities) as measured by the accounting 'books'. The term is used in the context where the speaker is trying to distinguish between the accounting measures (usually historical cost) and the market value. While it can be used to refer to the business' total equity, it is most used
as a 'per share' value': The balance sheet Equity value is divided by the number of shares outstanding at the date of the balance sheet (not the average o/s in the period).
as a 'diluted per share value': The Equity is bumped up by the exercise price of the options, warrants or preferred shares. Then it is divided by the number of shares that has been increased by those added.

See Also: Value Investing , Price-to-Book Ratio , Active Portfolio Management , P/E Ratio

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