When determining whether you want to invest in a company, you may use financial ratios and calculations based on information from its financial statements to help make your decision. One of the metrics that you could evaluate is the net worth per share or book value. This tells you exactly how much equity in the company is present in each share available in the market at any given time. Calculating this figure can provide you with valuable insight about the company.
Calculate the net worth of the company. This is often already done for you on the balance sheet of a company. To calculate a net worth, you simply take the total assets and subtract the total liabilities from them. When looking on the balance sheet of a company, this figure is often listed as "Shareholder's Equity."
Figure out the number of outstanding shares in the market place. This number can typically be found on the balance sheet of a company. It is typically listed under the category "Capital Stock."
Divide the total that you came up with in step 1 by the number of outstanding shares that you found in step 2. For example, if the company has $10,000,000 in shareholder equity and 1 million outstanding shares, this provides you with a net worth per share of $10.
Compare this number to other similar companies in the same industry. You can use this as a point of comparison to see how much value you are actually getting with each share you buy.
Always do your own research and calculations. You may be able to find this calculation already done for you online or in newsletters. However, making the calculations yourself helps you avoid investing based on a mistake in someone else's calculation.
Do not put too much weight into this single metric when making investment decisions. You should look at several factors before making a stock purchase.