3.21What is book value?
1What is it?
Book value is the company’s net worth in its accounts: total assets minus total liabilities. Book value per share divides that by the number of shares.
2Why does it exist?
It estimates what shareholders would get if the company sold everything and paid all debts (in theory). Comparing price with book value is a valuation tool (P/B ratio, Level 6).
3Calculation
Book value per share = (Assets − Liabilities) ÷ Shares
- Assets ₹5,000 cr, liabilities ₹3,000 cr → equity ₹2,000 cr.
- Shares 100 cr → BVPS = ₹20.
Book value per share = ₹20.
4Quick revision
- Book value = assets − liabilities.
- Per-share version used in P/B.
- More useful for banks and asset-heavy firms.
5Knowledge check
Q1. Assets ₹800 cr, liabilities ₹300 cr, shares 25 cr. BVPS?Show answer
₹20.
Q2. Is book value the same as market cap?Show answer
No. Book value is from accounts; market cap is from the share price.
Q3. For which businesses is book value most useful?Show answer
Banks, financial companies and asset-heavy businesses.
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