Book ValueBV
Book value is a company’s total assets minus its total liabilities, as shown in its accounts. Dividing the share price by book value per share gives the price-to-book ratio.
Book value is what a company's balance sheet says belongs to shareholders: assets minus liabilities. Comparing it with the share price helps value investors judge whether a stock is cheap or expensive.
- Category
- Fundamentals and Macroeconomics
- Reading time
- 3 min
- Also called
- Shareholders' equity, Net asset value (company), Book equity
- Updated
Book value in plain words
Shareholders' equity is what would remain if a company sold everything it owns and paid off everything it owes.1
That remainder belongs to the shareholders.1 It is also called capital or net worth.1
Book value is an accounting number; it is not the same as what the market says the equity is worth (market capitalisation).2
How to calculate book value per share
Find total assets
Take them from the latest balance sheet.
Find total liabilities
Include all debts and obligations.
Subtract
Calculate book value as total assets minus total liabilities.2
Remove preferred equity
Common shareholders' book value excludes preferred stock.
Divide by shares
Book value per share = common equity ÷ shares outstanding.
Compare with price
Keep the two apart: book value comes from the balance sheet, market cap from the share price.2
Worked examples
Example 1 — Basic book value
BV $300MA hypothetical company has $900M assets and $600M liabilities.
| Assets | $900M |
| Liabilities | $600M |
| Book value | $300M |
The $300M is what shareholders would keep if every asset were sold and every debt repaid.1
Example 2 — Price-to-book
P/B 2.0xHypothetical book value per share is $15 and the stock trades at $30.
| BVPS | $15 |
| Price | $30 |
| P/B | 2.0x |
Investors pay twice book value, a reminder that accounting equity and market value are different things.2
Example 3 — Below book
P/B 0.7xA hypothetical bank has BVPS of $40 and trades at $28.
| BVPS | $40 |
| Price | $28 |
| P/B | 0.7x |
A low price-to-book may mean a bargain — or doubts about the assets. Book equity is only worth its stated amount if the assets are.1
Book value vs market value
| Aspect | Book value | Market value |
|---|---|---|
| Source | Balance sheet | Share price × shares |
| Based on | Accounting values | Expectations |
| Changes | Quarterly | Every trade |
| Best for | Asset-heavy firms | All listed firms |
How investors use book value
Value screening
Find low price-to-book stocks for Fundamental Analysis.
Bank valuation
Banks are often priced against book.
Downside estimate
Book gives a rough floor in liquidation.
Return analysis
Compare Earnings with book to judge returns.
Advantages and disadvantages
Advantages
- Easy to find on the balance sheet.
- Stable compared with earnings.
- Useful for banks and asset-heavy firms.
- Gives a rough liquidation reference.
Disadvantages
- Ignores intangibles like brands.
- Assets may be worth more or less than book.
- Buybacks can distort it.
- Accounting rules differ by country.
Going deeper
Read as far as you need. Each level builds on the one before it.
Basic idea
Beginner
Think of book value as the shareholders' leftover after a full sale of assets and repayment of debts.1
Different names
Intermediate
Shareholders' equity — also called capital or net worth — divided by shares outstanding gives book value per share.1
Book vs market equity
Advanced
Analysts keep accounting equity and market value apart.2 The gap reflects growth, intangibles and risk.
Common mistakes
Assuming low P/B is cheap
Assets may be impaired.
Using book for tech firms
Intangibles are often missing from book.
Forgetting preferred stock
Exclude it for common BVPS.
Mixing accounting regimes
Rules differ by country.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- Book value = assets − liabilities.
- It belongs to shareholders.
- It differs from market capitalization.
- P/B compares price with book.
- Best for asset-heavy companies.
Frequently asked questions
Can book value be negative?
Is book value the same as liquidation value?
Where do I find it?
Further learning
- Market Capitalisation
The market value of equity.
- Fundamental Analysis
Using book in valuation.
- Price-to-Earnings Ratio
Another valuation ratio.
- Earnings
What builds book over time.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- SEC. Beginners' Guide to Financial Statements (opens in a new tab) Checked .
- Wall Street Prep. Return on Equity (ROE) | Formula + Calculator (opens in a new tab) Checked .
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. We are not affiliated with any publisher linked above. Last reviewed . Report an error or request a source credit.