Tuesday, November 15, 2016

How to Calculate Book Value Per Share?

Picture Explains the Concept and Formula for calculating book value per share
Book Value Per Share - Concept and Formula
Calculating book value per share is quite simple. There are two distinct ways to obtain the results, as follows, from the:

1.     Assets side of the Balance Sheet
2.     Liabilities Side

Let us take a practical example. Below we present the actual summarised balance sheet of the popular share SJVN Ltd.

Balance Sheet as on 31st March 2015
(Rs. in Crores [1 Crore = 10 Million])


Fixed Assets
Equity Capital

Reserves and Surplus
Non-Current Investments
Net Worth
Long-term Loans and Advances

Other non-current assets
Long-term borrowings

Other long-term liabilities
Current Assets

Short-term borrowings
Intangible Assets

Other Current Liabilities
Total Assets
Total Liabilities

Follow the six easy steps given belo:

Method 1: From the Assets Side of the Balance Sheet:

Step 1
Ascertain the total value of all assets from the firm’s ‘Balance Sheet’.

Rs.14,594.45 Crores

Step 2
Deduct following intangible assets, if any, from the total value of assets, to obtain value of total tangible assets:
1.     Goodwill/ Acquisition Goodwill/ Cost of Control
2.     Brand Value
3.     Preliminary and pre-operating expenses
4.     License fees/ lump sum royalty fees

Tangible Assets = Rs.14,594.45 – 0.22 = 14,594.23 Crores

Step 3
Determine the total outside liabilities – that is all liabilities and dues payable to outsiders other than shareholders – that is all liabilities other than net worth.

Total Outside Liabilities = Rs. 14,594.45 – 10,203.04 = 4,391.41 Crores

Step 4
Deduct total outside liabilities from total tangible assets and obtain the value of net assets.

Net Assets = Rs.14,594.23 – 4,391.41 = 10,202.82 Crores

Step 5
Find out the total number of equity shares. This can read directly from the schedules or by dividing the value of equity capital by the face value of the share.

Total Number of Equity Shares = Rs. 4,136.63 ÷ Rs.10 = 413.66 Crores

Step 6
Calculate the book value per share by dividing the net assets by the total number of equity shares.

Book Value Per Share = Rs.10,202.82 Crores ÷ 413.66 Crores = Rs.24.66

Method 2: From the Liabilities side of the Balance Sheet

Step 1
Ascertain the net worth. This is the sum of value equity share capital and reserves and surplus.

Net Worth = Rs. 4,136.63 + Rs. 6,066.41 = Rs. 10,203.04 Crores
Step 2
Deduct value of intangible assets from the net worth to obtain tangible net worth.

Tangible Net Worth = Rs.10,203.04 – 0.22 = Rs.10,202.82 Crores

Step 3
Divide the tangible net worth by the total number of equity sahres (Step 5 of Method 1) to obtain the book value per share.

Book Value Per Share = Rs.10,202.82 ÷ 413.66 = Rs.24.66

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