BOOK VALUE PER SHARE

BOOK VALUE
The value of a security or asset as entered in
a firm's books

The value at which an asset is carried on a
balance sheet. To calculate, take the cost of
an asset minus the accumulated depreciation


DIFFERENCE BETWEEN BOOK
VALUE AND MARKET VALUE

Book Value literally means the value of the business
according to its "books" or financial statements. In this case,
book value is calculated from the balance sheet, and it is the
difference between a company's total assets and total
liabilities. Note that this is also the term for shareholders'
equity. For example, if Company XYZ has total assets of
$100 million and total liabilities of $80 million, the book
value of the company is $20 million. In a very broad sense,
this means that if the company sold off its assets and paid
down its liabilities, the equity value or net worth of the
business, would be $20 million.



Market Value
Is the value of a company according to the
stock market. Market value is calculated by
multiplying a company's shares
outstanding by its current market price. If
Company XYZ has 1 million shares
outstanding and each share trades for $50,
then the company's market value is $50
million. Market value is most often the
number analysts, newspapers and investors
refer to when they mention the value of the
business
MUHAMMAD SAUD ANSARI
1269
BOOK VALUE PER SHARE

The book value of a company divided by the
number of shares outstanding

The ratio of stockholder equity to
the average number of Common
shares. Book value per share should not be
thought of as an indicator of economic worth,
since it reflects accounting valuation (and not
necessarily market valuation).
BOOK VALUE PER SHARE

The book value per share formula is
used to calculate the per share value
of a company based on its equity
available to common shareholders.
Book Value Per share

Total Shareholder Equity-Preferred Equity

Total Outstanding share
EXAMPLE
Company XYZ reports total assets of
$17 million and total liabilities of $7
million for a total book value of 10
million. The company has
2,000,000 shares outstanding. Thus,
the book value per share is $5.00 (10
million / 2 million = 5.00).

ARSALAN UL-ISLAM
1253
Definition of 'Stock Option

A privilege, sold by one party to
another, that gives the buyer the
right, but not the obligation, to
buy (call) or sell (put) a stock at
an agreed-upon price within a
certain period or on a specific
date.


Definition of 'Stock Option

"Stock options are contracts; they
don't represent ownership in
anything. They are merely contracts
that grant you certain rights".
Stock options" are often called
derivatives because they are derived
from stock prices.



If you buy or own a stock option
contract it gives you the "right", but
not the "obligation", to buy or sell
shares of a stock at a "set price" on
or before a given "date" (time
period). After this date, your contract
expires and your option ceases to
exist.
MUHAMMAD HAROON
AMEER
1262

2 Types of Stock Options
Puts and Calls

The "Put" option gives its buyer the
right, but not the obligation, to "sell"
shares of a stock at a specified price
on or before a given date.

The "Call" option gives its buyer
the right, but not the obligation,
to "buy" shares of a stock at a
specified price on or before a
given date.
SHEHZAD AHMED
1278

'Stock Appreciation Right'
'SAR'


'Stock Appreciation Right'

A right, usually granted to an employee, to
receive a bonus equal to the appreciation in
the company's stock over a specified period.
Like employee stock options, SARs benefit
the holder with an increase in stock price; the
difference is that the employee is not
required to pay the exercise price (as with an
employee stock option), but rather just
receives the amount of the increase in cash or
stock.
Example
For example, say an employee is
given 100 SARs. Good fortune
shines and the stock increases $50
per share over three years. As a
result, the employee gets $5,000
(100 SARs x $50 = $5,000). The
main benefit with SARs is that the
employee does not have to purchase
anything to receive the proceeds.