Book value and market to book value per share, Finance Basics

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Book Value and Market to book value per share

Book value per share (BVPS) = Net worth Equity/No. of ordinary shares

It is called also liquidity ratio that shows the amount attributable to each share if the firm was liquidated and all asset sold on their book value.
Such ratio is based at the residual amount that would keep after paying all liabilities from the sales proceeds of the assets.

Market to book value per share = MPS/BVPS

This ratio shows the amount of goodwill attached to the firm that is the price in excess of the sales value of the assets of the firm. If the ratio is greater 1 like MBVPS >1 this show a positive goodwill while it is less than 1 a -ve goodwill.

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