Dear Investors,
Today we are presenting information about Book Value, which can help you partially in valuation of stock while taking your buying decision.
Definition: The value at which an asset is carried on a balance sheet. To calculate, take the cost of an asset minus the accumulated depreciation(liabilities). In simple terms that company decided to liquidate its assets and payout liabilities the reset of the amount if they divided into per share the amount is called as Book Value.
So this book value is very important. especially for the investors who are safe players. Lets look into the example to understand about book value.
following are the details of the XYZ Company books:
Book Value per share : $35.50
Current Market Price per share : $47.50
Long Term Debt Equity Ratio: 1.02
One ratio which we should keep in our mind is that Long Term Debt Equity Ration should be less than 1, In this case company has more debt than its equity so not a good scenario to be there. If company started liquidate its assets then each share holder will get 35.50, but if you buy this company share at 47.50 you end up loosing at least $12.00 (currency units will be different from country to country but this log will be same).
Feel free to write your feedback in comments section. Net article we will be covering more about Debt to Equity Ration.
Today we are presenting information about Book Value, which can help you partially in valuation of stock while taking your buying decision.
Definition: The value at which an asset is carried on a balance sheet. To calculate, take the cost of an asset minus the accumulated depreciation(liabilities). In simple terms that company decided to liquidate its assets and payout liabilities the reset of the amount if they divided into per share the amount is called as Book Value.
So this book value is very important. especially for the investors who are safe players. Lets look into the example to understand about book value.
following are the details of the XYZ Company books:
Book Value per share : $35.50
Current Market Price per share : $47.50
Long Term Debt Equity Ratio: 1.02
One ratio which we should keep in our mind is that Long Term Debt Equity Ration should be less than 1, In this case company has more debt than its equity so not a good scenario to be there. If company started liquidate its assets then each share holder will get 35.50, but if you buy this company share at 47.50 you end up loosing at least $12.00 (currency units will be different from country to country but this log will be same).
Feel free to write your feedback in comments section. Net article we will be covering more about Debt to Equity Ration.
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