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Book value of equity per share definition

Description

Book value of equity per share (BVPS) ratio shows the amount of money per share in case the company would be liquidated for the balance sheet value. To put it simply, it is a ratio that indicates the minimum value of company’s equities. Data to calculate this ratio is collected from statement of retained earnings and balance sheet.

Book value of equity per share is important for the owners, because it allows to measure the amount of money, belonging to them within the company (after all debts are paid out). An investor can compare this ratio to the market share value.

While making a comparison to the other companies’ ratios, earnings per share of the current company must be divided by its nominal value (face value) of the share.

Norms and limitations

There are no general norms for this ratio.

This ratio should be considered along with other financial ratios as it only shows limited view of the company's situation.

Formula

Equity (Shareholders’ equity) shows the equity stake currently held on company’s balance sheet. In other words, it means total assets minus total liabilities.

Shares outstanding might be explained as issued and outstanding shares.