Answer first
What this calculator tells you
Calculate book value per share and the price-to-book ratio. Compare the price you pay with the net assets behind each share. Formula: Book value per share = (shareholders' equity − preferred equity) ÷ common shares outstanding; P/B = price ÷ book value per share. At the worked-example inputs, the book value per share is $8.00. Holding every other input steady, moving shareholders' equity from $320,000,000 to $480,000,000 moves the result from $6.40 to $9.60.
Transparent method
The formula
Compare the price you pay with the net assets behind each share.
Worked example
Example inputs
How to interpret the result
Book value per share is what each common share would hold if the company sold its assets at their recorded values and paid off everything it owes. With $400 million of equity across 50 million shares, that is $8. A $12 share price then trades at 1.5 times book. Asset-heavy businesses such as banks and utilities are usually judged this way, while software firms rarely are.
At the worked-example inputs the book value per share is $8.00. It rises with shareholders' equity and falls as common shares outstanding and preferred equity increase; share price does not move it.
Investment returns are uncertain; taxes, fees, volatility and cash-flow timing can materially change results.
Before you rely on it
What to check
Subtract preferred equity before dividing. Those holders have a prior claim, so the common shares own only what is left.
The common error
Where people go wrong with book value per share calculator
Treating book value as what the assets would fetch. Recorded values lag real ones, and a firm's brand, software or customer base often sits nowhere on the balance sheet.
Sensitivity evidence
How shareholders' equity changes the book value per share
Holding every other input at the worked-example value, moving shareholders' equity from $320,000,000 to $480,000,000 moves the book value per share from $6.40 to $9.60: a spread of $3.20, or 40% of the worked-example result.
| Shareholders' equity | Book value per share | Price-to-book ratio |
|---|---|---|
| $320,000,000 | $6.40 | 1.88× |
| $360,000,000 | $7.20 | 1.67× |
| $400,000,000worked example | $8.00 | 1.50× |
| $440,000,000 | $8.80 | 1.36× |
| $480,000,000 | $9.60 | 1.25× |
Every input, tested
Which input moves the book value per share most
Of the 4 inputs, common shares outstanding moves the book value per share most ($1.62 across the range tested) and preferred equity moves it least ($0.00). Share price does not change it at all.
| Input | Tested from | To | Book value per share at each end | Swing |
|---|---|---|---|---|
| Common shares outstanding | 45,000,000 | 55,000,000 | $8.89 to $7.27 | $1.62 (20%) |
| Shareholders' equity | $360,000,000 | $440,000,000 | $7.20 to $8.80 | $1.60 (20%) |
| Preferred equity | -$1.00 | $1.00 | $8.00 to $8.00 | $0.00 |
| Share price | $11 | $13 | $8.00 to $8.00 | none |
Two variables at once
Book value per share by shareholders' equity and common shares outstanding
Across the grid the book value per share runs from $5.33 to $12. Moving shareholders' equity from $320,000,000 to $480,000,000 shifts it by $3.20 at the middle column, and moving common shares outstanding from 40,000,000 to 60,000,000 shifts it by $3.33 at the middle row, so common shares outstanding is the bigger lever here.
| Shareholders' equity \ Common shares outstanding | 40,000,000 | 50,000,000 | 60,000,000 |
|---|---|---|---|
| $320,000,000 | $8.00 | $6.40 | $5.33 |
| $360,000,000 | $9.00 | $7.20 | $6.00 |
| $400,000,000 | $10 | $8.00 | $6.67 |
| $440,000,000 | $11 | $8.80 | $7.33 |
| $480,000,000 | $12 | $9.60 | $8.00 |
The highlighted cell is the worked example: $8.00.
Step by step
The worked example, input by input
| Input | Value used | What it means |
|---|---|---|
| Shareholders' equity | $400,000,000 | Enter the shareholders' equity used in this calculation. |
| Preferred equity | $0.00 | Enter the preferred equity used in this calculation. |
| Common shares outstanding | 50,000,000 | Enter the common shares outstanding used in this calculation. |
| Share price | $12 | Enter the share price used in this calculation. |
| Book value per share | $8.00 | |
| Price-to-book ratio | 1.50× | |
Inputs, definitions and assumptions
Shareholders' equity
Enter the shareholders' equity used in this calculation. The prefilled worked-example value is $400,000,000.
Preferred equity
Enter the preferred equity used in this calculation. The prefilled worked-example value is $0.00.
Common shares outstanding
Enter the common shares outstanding used in this calculation. The prefilled worked-example value is 50,000,000.
Share price
Enter the share price used in this calculation. The prefilled worked-example value is $12.
How to use this calculator
- 1Verify the inputs. Gather shareholders' equity, preferred equity, common shares outstanding and share price from your own documents; the prefilled values are examples.
- 2Save a baseline. The worked example puts the book value per share at $8.00. Store your own version of it as Scenario A.
- 3Test one change. Start with common shares outstanding, the input with the biggest effect here: moving common shares outstanding from 45,000,000 to 55,000,000 takes the book value per share from $8.89 to $7.27, a swing of 20% of the worked-example figure.
- 4Check the extremes. At half the example common shares outstanding (25,000,000) the book value per share is $16; at double (100,000,000) it is $4.00.
People also ask
Frequently asked questions
How do you calculate book value per share?
Book value per share = (shareholders' equity − preferred equity) ÷ common shares outstanding; P/B = price ÷ book value per share. Enter shareholders' equity in dollars, preferred equity in dollars and share price in dollars. At the worked-example inputs the book value per share is $8.00.
What does the book value per share result mean?
Compare the price you pay with the net assets behind each share. At the worked-example inputs the book value per share is $8.00. It rises with shareholders' equity and falls as common shares outstanding and preferred equity increase; share price does not move it.
How much does shareholders' equity change the book value per share?
Holding every other input at the worked-example value, moving shareholders' equity from $320,000,000 to $480,000,000 moves the book value per share from $6.40 to $9.60, a spread of $3.20.
What are the limits of this book value per share calculator?
Investment returns are uncertain; taxes, fees, volatility and cash-flow timing can materially change results. The tables on this page test shareholders' equity only from $320,000,000 to $480,000,000; a value outside that range is not tabulated here.
Which input moves the book value per share most in the book value per share calculator?
Ranked by how far each moves the book value per share across the range tested: common shares outstanding ($1.62, 20%), shareholders' equity ($1.60, 20%) and preferred equity ($0.00). Share price does not change it.
If I double common shares outstanding in the book value per share calculator, does the book value per share double?
Doubling it from 50,000,000 to 100,000,000 takes the book value per share from $8.00 to $4.00, which is 0.50 times the worked-example figure. So it falls instead of rising. Halving it to 25,000,000 gives $16.
How much does preferred equity matter in the book value per share calculator?
The worked example uses $0.00. With the other inputs left at the worked example, moving preferred equity from -$1.00 to $1.00 takes the book value per share from $8.00 to $8.00.
How much does common shares outstanding matter in the book value per share calculator?
The worked example uses 50,000,000. Holding every other input at its worked-example value, moving common shares outstanding from 45,000,000 to 55,000,000 takes the book value per share from $8.89 to $7.27, a swing of 20% of the worked-example figure.
How much does share price matter in the book value per share calculator?
The worked example uses $12. The book value per share does not depend on share price; it moves the price-to-book ratio from 1.38× to 1.63× instead when share price goes from $11 to $13.
Which inputs change the price-to-book ratio in the book value per share calculator?
At the worked-example inputs it is 1.50×. Shareholders' equity takes it from 1.67× to 1.36×, preferred equity takes it from 1.50× to 1.50×, common shares outstanding takes it from 1.35× to 1.65× and share price takes it from 1.38× to 1.63×.
Sources and evidence
Free Calculators Online is independent and is not affiliated with or endorsed by the source organizations. Educational estimates only.