What do the terms book-to-value or book-to-market refer to? How do you arrive at this figure?

Question

What do the terms book-to-value or book-to-market refer to? How do you arrive at this figure?

Answer 1

book value is equal the company's Total Assets minus its Total Liabilities.

market value is equal to the company's Stock Price per Share multiplied by the Total Number of Shares Outstanding (typically looking at the diluted number of shares outstanding).

Book Value can be found on a company's balance sheet, which you can find all over the net, but i always go to www.sec.gov, and then you go into the company's 10-K filing.  also 10-Q (quarterly).

you can also get the number of shares outstanding from the 10-K/Q filings.  but also you can get that through many internet finance web sites.  

on a balance sheet, book value will typically be shown towards the bottom, and can also be called Stockholders' Equity, or Shareholders' Equity, or Members' Capital, or just Total Capital.

so you divide Book value by Market value.

depending on the industry, book values tend to be in teh range of 0.5 - 5.0.   but this is a generalization.   internet and other high tech stocks can trade at 100 times book value.

your standards nuts and bolts type company will often trade at 1 - 3 times book value.   banks typically trade around 2 - 3 times book value.