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Book Ratio Formula:
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The Book Ratio, also known as Book Value Per Share, represents the amount of shareholders' equity attributable to each outstanding share of a company. It provides insight into the value that shareholders would receive per share if the company were liquidated.
The calculator uses the Book Ratio formula:
Where:
Explanation: This ratio divides the total shareholders' equity by the number of outstanding shares to determine the book value per share.
Details: The Book Ratio is important for investors to assess whether a stock is undervalued or overvalued compared to its market price. It's also used in fundamental analysis and valuation metrics.
Tips: Enter shareholders' equity in currency units and the number of shares as a whole number. Both values must be positive (equity > 0, shares ≥ 1).
Q1: What is considered a good Book Ratio?
A: A higher Book Ratio generally indicates that each share represents more underlying value. However, the interpretation depends on the industry and company specifics.
Q2: How does Book Ratio differ from Market Price?
A: Book Ratio represents the accounting value per share, while market price reflects what investors are willing to pay based on future expectations and market sentiment.
Q3: When is Book Ratio most useful?
A: It's particularly useful for value investors analyzing companies with tangible assets, and for comparing companies within the same industry.
Q4: Are there limitations to Book Ratio?
A: Yes, it doesn't account for intangible assets, future growth potential, or market conditions. It may be less relevant for service-based or technology companies.
Q5: Can Book Ratio be negative?
A: Yes, if a company has negative shareholders' equity (liabilities exceed assets), the Book Ratio will be negative, indicating financial distress.