metrics explained

Book Value per Share vs Tangible Book Value per Share: What's the Difference?

Investors often mistake book value per share and tangible book value per share, but there is a big difference between the two metrics. Book value per share is the total value of a company's equity divided by the number of shares outstanding. Tangible book value per share, on the other hand, is the book value per share minus intangible assets. Intangible assets are things like patents, copyrights, and goodwill. They're important, but they're not physical assets that can be sold if the company goes under.

Why Book Value per Share is Important

Book value per share is a good way to measure a company's financial health. It shows how much equity the company has on its balance sheet. The higher the book value per share, the better off the company is. A high book value per share means that the company has a lot of assets and little debt. This is a good thing because it means that the company can weather tough times and still pay its shareholders.

Why Tangible Book Value per Share is Important

Tangible book value per share is important because it shows the value of a company's assets minus its intangible assets. Intangible assets are important, but they're not physical assets that can be sold if the company goes under. This is a good thing because it means that the company is less likely to go bankrupt if it hits tough times.

The Difference Between Book Value per Share and Tangible Book Value per Share

The difference between book value per share and tangible book value per share is that book value per share includes intangible assets, while tangible book value per share does not. Intangible assets are important, but they're not physical assets that can be sold if the company goes under. This is a good thing because it means that the company is less likely to go bankrupt if it hits tough times.

How to Calculate Book Value per Share

To calculate book value per share, you need to know two things: the total value of the company's equity and the number of shares outstanding. The total value of the company's equity is the sum of the value of its assets and the value of its liabilities. The number of shares outstanding is the number of shares that have been issued by the company.

How to Calculate Tangible Book Value per Share

To calculate tangible book value per share, you need to know three things: the total value of the company's equity, the value of its intangible assets, and the number of shares outstanding. The total value of the company's equity is the sum of the value of its assets and the value of its liabilities. The value of its intangible assets is the sum of the value of its patents, copyrights, and goodwill. The number of shares outstanding is the number of shares that have been issued by the company.

The Bottom Line

The bottom line is that book value per share is a good way to measure a company's financial health, while tangible book value per share is a good way to measure the value of a company's assets.

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