Book value is the total value of the net assets of a company attributable to – or owned by – shareholders. It consists of the firm’s fixed assets (buildings, machinery etc) plus its current assets (those which are constantly on the move such as raw materials, stock, working capital, etc), minus current (short-term) liabilities, long-term creditors and any provisions.
Book value is also known as ‘net tangible assets’, ‘shareholders funds’ or ‘stockholders equity’. Book value divided by the number of shares in issue will give you book value per share. If you then divide the share price by this, you get the price-to-book-value ratio (p/bv).
• See Tim Bennett’s video tutorial: Beginner’s guide to investing: the price-to-book ratio.