Info 1: calculate book value definition
Info 2: calculate book value for any business
Info 3: calculate book value vs calculate earnings per shares
Info 4: example for calculating book value
Opening information:
Calculate book value breaks into three words calculate, book, and value. Calculate means compute something mathematically, book means item or things, and value means worth. Calculating book value means computing the worth of one item.
So let’s have a look at what is Calculate book Value, how Book Value works in the stock market for all public Corporations, what the difference is between Calculate a Book Value and Calculate Earnings per Share, and finally one brief example of Calculate Book Value vs calculate earning per Share.
Info 1: calculate book value definition
There is a computer service business which had been run by Nelson in the United States of America, he especially lives in California. In the first 3 years of business, Nelson works hard to build his minimum customer base.
He had 12 million dollars in assets 5 million dollars in liabilities, and 7 million dollars in equity of the business with outstanding shares of 200,000. Nelson asked for the money for new investment in his business computer service all over his city.
The angel Investors had decided to invest in the Nelson business because its shares of the business had great value, which they found by dividing the 7 million dollars in equity with 200,000 outstanding shares.
This shows the value of 35 dollars for each share price, but Nelson asked only 28 dollars for each share for 100,000 shares to raise more capital.
Here the 35 dollars of each share of Nelson’s business which are found by dividing the equity with outstanding shares are what elaborate as a book value of one business.
So let’s dive into how to calculate book value in any type of industry in the public market among Corporations.
Info 2: calculate book value for any business
Calculating the book value doesn’t represent any of the specific calculations or objects, instead, it’s an idea to identify the value of one book.
The book is a thing that is priced and valued by the business as money, which means pure equity. The book is the one which is considered as an equity of the one organization.
Supposedly if the calculation doesn’t rely on and align on the basis equity of the one public institution, then such calculations are not included or come in a calculation book value.
If the automobile industry had 120 billion dollars in the equity of one business, the whole equity value is what called as full amount of book value, when it is divided by all the outstanding shares of the 12 billion shares in the automobile business, then each share would represent the 10 dollars.
Where this is 10 dollars for each share by dividing the whole equity by what is named as a book value.
Next, the tech business which didn’t have more physical materials other than electronic items, say which had 87 billion dollars in equity and outstanding of 1.2 billion shares, by dividing the whole equity with a total of outstanding shares where gave a value of 72.5 dollars.
This 72.5 dollars is the one which is demonstrated as a book value because it’s an amount that is paid to such a business as a stock Investor.
On the other hand, drinks-selling businesses like Coca-Cola had more physical assets than normal electronic assets, which are highly hard to reduce in price and value, where they had 250 billion dollars in equity with 30 billion shares outstanding.
Dividing the 250 billion dollars in equity with 30 billion outstanding shares leads to each share value of 8.40 dollars. This eight-and-a-half dollar is what is illustrated as a book value.
Most of them calculate a book value and the earnings per share in one organization, so let’s jump into the key difference in it anyway.
Info 3: calculate book value vs calculate earnings per shares
The difference between the calculated book value and the earning per shares price of a business is, that calculated book value refers the each share value in the view of equities distribution which is not aligned with any earning amount.
On the other side, Earning per share shows each share earning from the net income of one business, which didn’t have any relation to the equity of the one Industry. To make you more clear about the calculated book value, let’s look into one brief example below.
Info 4: example for calculating book value
Say the company G had 10 billion dollars in net income this year and 98 billion dollars in equity with outstanding shares of 1.4 billion.
If you dividend the 1.4 billion shares with equity you would get 70 dollars in book value or if you divided the 1.4 billion shares with 10 billion dollars in net income you would get 7.1 dollars for each share. Where this 7.1 dollar is illustrated as earnings per share.