What Is a Book Value Per Share?

Net assets per share refers to the ratio of shareholders' equity to the total number of shares. The calculation formula is: net assets per share = total shareholder equity / total share capital stock par value. This indicator reflects the present value of assets owned by each share. The higher the net assets per share, the more the value of the assets per share owned by the shareholders; the less the net assets per share, the less the value of the assets per share owned by the shareholders. Generally, the higher the net assets per share, the better. ^[1]

Net assets per share

The company's net assets represent the company's own property, as well as the shareholders' rights and interests in the company. because

"Net assets" refers to the net amount of a company's total assets minus its liabilities. It is also called "shareholder equity" or "

The formula for calculating net assets per share is: net assets per share = total shareholder equity / total share capital stock denomination. This indicator shows the value of the company's book net assets that can be allocated for each common stock issued. The net book assets mentioned here refer to the balance of the company's total assets minus liabilities on the company's books, that is, the total shareholders' equity. The net asset per share index reflects how much each share is worth on the company's books at the end of the accounting period. If the company has the same nature and the market price is similar, the higher the net asset per share of a company's stock, the company's development The greater the potential and the value of the stock's investment, the less the investment risk an investor bears.

The reason for the adjustment of the net assets per share is that due to the prudent restrictions of the current accounting system, some accounting methods are still at a certain distance from international practice. According to internationally accepted accounting standards, corporate expenditures are divided into revenue expenditures and capital expenditures. The benefits of revenue expenditures are only relevant to the current fiscal year, while the benefits of capital expenditures are relevant to several fiscal years. The adjustment of the net assets per share indicator actually deducts some potential expenses or future expenses in the assets, which is undoubtedly more adapted to international practices and combined with the actual situation of Chinese enterprises, provides a valuable reference for investors index.

The net assets of a stock are the actual assets contained in each share of a listed company.

As we all know, the return on net assets is an important indicator of the profitability of listed companies and reflects the profitability of business owners. However, some people have slightly expanded the return on net assets when choosing investment products. When we choose, we should Comprehensive consideration, recognizing the shortcomings of return on net assets, comprehensively considering the choice of investment products with reference to other indicators.

The return on net assets is calculated as follows: return on net assets (R) = earnings per share or company net profit (E) / net assets per share or company equity (A) × 100%.

First, we should see the flaws in the formula itself. This calculation formula only reflects the value of the return rate, but does not reflect the size of the two numbers of the numerator and denominator. Through the formula, we can see that there are many ways to improve ROE. Among them, the E value is unchanged, the A value is reduced, or E, Both values of A are reduced at the same time, and the value of A is reduced more. Both methods can increase the R value, but it is obvious that the decrease of E or A is a sign of the decline of the company's profitability. The company has higher profitability.

Second, because investors in China have always valued R, it has brought some bad guidance to the market. Taking it as the standard, it is not conducive to the company's stable operation and sustainable development. Some listed companies with poor performance and low net worth, on the one hand, obtain book profits through connected transactions by large shareholders or directly seek subsidy income from local governments to increase On the other hand, due to successive operating losses or repeated transfers of shares, the denominator has become smaller. Once the refinancing funds are available, they can be leveled for large shareholders for free, or they can purchase government bonds or repay loans. Funds were scarce, so corporate development stalled. In addition, the domestic pursuit of R has hindered the internationalization of enterprises. According to international standards, a profitable indicator for judging the operating performance of a company is the return on total assets rather than the return on net assets. Since total assets are equal to the sum of net assets and liabilities, the calculated return on total assets tends to be significantly lower than the return on net assets when the level of returns is constant. If we do not use a comprehensive evaluation system to assess the overall status of the enterprise, the enterprise will be very unsuited to issues such as the rating of international institutions that the company will face in the future, and it will be difficult to correct it and face obsolescence.

In short, when conducting a financial analysis of a company, you can't just consider who has a high return on net assets. Need to study the gross margin, net profit, turnover rate, financial leverage in more detail, find differences between different companies, and study the reasons for these differences.

Then based on these things, judge the company's possible changes in the future, so as to find safe and reasonable investment opportunities.