The formulas
- Common equity = total equity - preferred equity
- Book value per share = common equity / shares outstanding
- Tangible = (common equity - goodwill and intangibles) / shares outstanding
- Price to book = market price / book value per share
How it works
Book value per share is the accounting net worth that belongs to each common share. Tangible book value takes out goodwill and other intangibles, which is the more conservative view and is common for banks and asset-heavy businesses.
Book value rests on historical cost accounting, so it can differ a lot from market value. Use shares outstanding at the balance sheet date, net of treasury shares. Include in the share count only common shares that are legally outstanding.
Illustrative figures only. Check the result against your firm's methodology before relying on it.
Common questions
Are noncontrolling interests included?
For parent common shareholders, use equity attributable to the parent.
What if the result is negative?
Common equity is below zero, for example because liabilities exceed assets or preferred claims exceed equity. Price-to-book is then left blank.
Which preferred value?
Liquidation preference is the usual choice, or carrying value if the instrument is not redeemable.
Formulas on this page are the standard definitions.
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