Find solution
What's a good finance book?

How do I interpret Price/Book and Book Value per Share on Yahoo Finance?

  • Say a stock Book Value per Share is 0.06. Does this mean that on the books each share is worth 0.06 cents? Would this imply that if the company were liquidated today the amount of cash generated divided by the number of shares would be 0.06 cents? How about Price/Book? If a company's Price/Book is 5.71, what does this mean exactly? I know the lower the number the better but "good" Price/Book values differ across industries and I'm just wondering how I can "read" it. For instance, if the Price/Book is 5.71, does this mean that investors are willing to pay $5.71 for every $1 worth of book assets? Thanks.

  • Answer:

    No Q1...Book value is book value...or should be for any audited financial statements. It does not imply anything about cash generation. Book value is the net asset value of the company according to standard accounting practice (GAAP, audited). Book value per share is the GAAP number / number of shares outstanding. 0.06 per share with 1 million shares outstanding, means the book value of the company is $60,000. Yes, Q2...$5.71 for every dollar of assets (GAPP, audited)

John at Yahoo! Answers Visit the source

Was this solution helpful to you?

Other answers

The correct interpretation of book value depends heavily on the types of assets that the company has "on its books". For example, if the company's assets consist only of cash, then book value reflects exactly what it represents. However, as the earlier poster suggests, accounting standards (such as GAAP) can mandate that totally worthless things have a "value", such as intellectual property that's now worthless, and yet may still remain on the books until it's "amortized". So, you really need to look at what's behind these numbers to understand whether they mean anything. The "theoretical" interpretation of a low Price/Book would be that it signifies an undervalued stock (particularly if far less than 1), but the reality is that may reflect value in one stock while meaning nothing for another. A company could have a Price/Book of 0.1 but a breakup value of absolute 0 if its balance sheet contains enough worthless assets, which I think you'll find are quite common if you dig deeper.

Related Q & A:

Just Added Q & A:

Find solution

For every problem there is a solution! Proved by Solucija.

  • Got an issue and looking for advice?

  • Ask Solucija to search every corner of the Web for help.

  • Get workable solutions and helpful tips in a moment.

Just ask Solucija about an issue you face and immediately get a list of ready solutions, answers and tips from other Internet users. We always provide the most suitable and complete answer to your question at the top, along with a few good alternatives below.