Book Value and P/B

Net worth per share.

Book value is net worth (assets minus liabilities) divided across shares. It's what would theoretically remain for shareholders if the company sold everything and paid all debts. Book value per share = (Assets − Liabilities) ÷ Shares P/B = Share price ÷ Book value per share Share at Rs 400, book value per share Rs 200. P/B = 2. The market values it at twice net worth. P/B below 1 Price below net worth, cheap, or troubled assets. P/B above 1 A premium over net worth, usually for expected earnings. Best for asset-heavy firms Very useful for banks and finance; less for asset-light firms. Great for banks/finance A floor-value sanity check Less swingy than earnings Weak for asset-light firms Book value can be stale Ignores future earnings

Part of Learn NEPSE Investing, a free course on reading Nepali company accounts and charts. Section: The Ratios.