Definition of book value and book value per share

book value and book value per share

Generally speaking, these terms
refer to the balance sheet value of an asset (or less often of a liability) or
the balance sheet value of owners’ equity per share. Either term emphasizes
that the amount recorded in the accounts or on the books of a business
is the value being used. The total of the amounts reported for
owners’ equity in its balance sheet is divided by the number of stock
shares of a corporation to determine the book value per share of its capital
stock.

Book value per share

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 of a company divided by the number of shares
outstanding

NPV (net present value of cash flows)

Same as PV, but usually includes a subtraction for an initial cash outlay.

PPF (periodic perpetuity factor)

a generalization formula invented by Abrams that is the present value of regular but noncontiguous cash flows that have constant growth to perpetuity.

PV (present value of cash flows)

the value in today’s dollars of cash flows that occur in different time periods.
present value factor equal to the formula 1/(1 - r)n, where n is the number of years from the valuation date to the cash flow and r is the discount rate.
For business valuation, n should usually be midyear, i.e., n = 0.5, 1.5, . . .

Adjusted present value (APV)

The net present value analysis of an asset if financed solely by equity
(present value of un-levered cash flows), plus the present value of any financing decisions (levered cash
flows). In other words, the various tax shields provided by the deductibility of interest and the benefits of
other investment tax credits are calculated separately. This analysis is often used for highly leveraged
transactions such as a leverage buy-out.

American shares

Securities certificates issued in the U.S. by a transfer agent acting on behalf of the foreign
issuer. The certificates represent claims to foreign equities.

Annual fund operating expenses

For investment companies, the management fee and "other expenses,"
including the expenses for maintaining shareholder records, providing shareholders with financial statements,
and providing custodial and accounting services. For 12b-1 funds, selling and marketing costs are included.

Annual percentage rate (APR)

The periodic rate times the number of periods in a year. For example, a 5%
quarterly return has an APR of 20%.

Annual percentage yield (APY)

The effective, or true, annual rate of return. The APY is the rate actually
earned or paid in one year, taking into account the affect of compounding. The APY is calculated by taking
one plus the periodic rate and raising it to the number of periods in a year. For example, a 1% per month rate
has an APY of 12.68% (1.01^12).

Annualized holding period return

The annual rate of return that when compounded t times, would have
given the same t-period holding return as actually occurred from period 1 to period t.

Authorized shares

Number of shares authorized for issuance by a firm's corporate charter.

Average collection period, or days' receivables

The ratio of accounts receivables to sales, or the total
amount of credit extended per dollar of daily sales (average AR/sales * 365).

BARRA's performance analysis (PERFAN)

A method developed by BARRA, a consulting firm in
Berkeley, Calif. It is commonly used by institutional investors applying performance attribution analysis to
evaluate their money managers' performances.

Bond value

With respect to convertible bonds, the value the security would have if it were not convertible
apart from the conversion option.

Book

A banker or trader's positions.

Book

cash A firm's cash balance as reported in its financial statements. Also called ledger cash.

Book profit

The cumulative book income plus any gain or loss on disposition of the assets on termination of the SAT.

Book runner

The managing underwriter for a new issue. The book runner maintains the book of securities sold.

Book value

A company's book value is its total assets minus intangible assets and liabilities, such as debt. A
company's book value might be more or less than its market value.

Book-entry securities

The Treasury and federal agencies are moving to a book-entry system in which securities are not represented by engraved pieces of paper but are maintained in computerized records at the
Fed in the names of member banks, which in turn keep records of the securities they own as well as those they
are holding for customers. In the case of other securities where a book-entry has developed, engraved
securities do exist somewhere in quite a few cases. These securities do not move from holder to holder but are
usually kept in a central clearinghouse or by another agent.

Capital market imperfections view

The view that issuing debt is generally valuable but that the firm's
optimal choice of capital structure is a dynamic process that involves the other views of capital structure (net
corporate/personal tax, agency cost, bankruptcy cost, and pecking order), which result from considerations of
asymmetric information, asymmetric taxes, and transaction costs.

Carrying value

book value.

Cash flow from operations

A firm's net cash inflow resulting directly from its regular operations
(disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing
securities), calculated as the sum of net income plus non-cash expenses that were deducted in calculating net
income.

Cash flow per common share

Cash flow from operations minus preferred stock dividends, divided by the
number of common shares outstanding.

Cash-surrender value

An amount the insurance company will pay if the policyholder ends a whole life
insurance policy.

Commercial paper

Short-term unsecured promissory notes issued by a corporation. The maturity of
commercial paper is typically less than 270 days; the most common maturity range is 30 to 50 days or less.

Committee, AIMR Performance Presentation Standards Implementation Committee

The Association for Investment Management and Research (AIMR)'s performance Presentation Standards Implementation
Committee is charged with the responsibility to interpret, revise and update the AIMR performance
Presentation Standards (AIMR-PPS(TM)) for portfolio performance presentations.

Compounding period

The length of the time period (for example, a quarter in the case of quarterly
compounding) that elapses before interest compounds.

Conversion value

Also called parity value, the value of a convertible security if it is converted immediately.

Credit period

The length of time for which the customer is granted credit.

Direct paper

Commercial paper sold directly by the issuer to investors.

Discount period

The period during which a customer can deduct the discount from the net amount of the bill
when making payment.

Discounted payback period rule

An investment decision rule in which the cash flows are discounted at an
interest rate and the payback rule is applied on these discounted cash flows.

Dividends per share

Amount of cash paid to shareholders expressed as dollars per share.

Dividends per share

Dividends paid for the past 12 months divided by the number of common shares
outstanding, as reported by a company. The number of shares often is determined by a weighted average of
shares outstanding over the reporting term.

Earnings per share (EPS)

EPS, as it is called, is a company's profit divided by its number of outstanding
shares. If a company earned $2 million in one year had 2 million shares of stock outstanding, its EPS would
be $1 per share. The company often uses a weighted average of shares outstanding over the reporting term.

Euro-commercial paper

Short-term notes with maturities up to 360 days that are issued by companies in
international money markets.

Evaluation period

The time interval over which a money manager's performance is evaluated.

Exercise value

The amount of advantage over a current market transaction provided by an in-the-money
option.

Expected value

The weighted average of a probability distribution.

Expected value of perfect information

The expected value if the future uncertain outcomes could be known
minus the expected value with no additional information.

Extraordinary positive value

A positive net present value.

Face value

See: Par value.

FHA prepayment experience

The percentage of loans in a pool of mortgages outstanding at the origination
anniversary, based on annual statistical historic survival rates for FHA-insured mortgages.

Firm's net value of debt

Total firm value minus total firm debt.

Fully diluted earnings per shares

Earnings per share expressed as if all outstanding convertible securities
and warrants have been exercised.

Funds From Operations (FFO)

Used by real estate and other investment trusts to define the cash flow from
trust operations. It is earnings with depreciation and amortization added back. A similar term increasingly
used is Funds Available for Distribution (FAD), which is FFO less capital investments in trust property and
the amortization of mortgages.

Future value

The amount of cash at a specified date in the future that is equivalent in value to a specified
sum today.

Growing perpetuity

A constant stream of cash flows without end that is expected to rise indefinitely.

Holding period

Length of time that an individual holds a security.

Holding period return

The rate of return over a given period.

Income statement (statement of operations)

A statement showing the revenues, expenses, and income (the
difference between revenues and expenses) of a corporation over some period of time.

Intrinsic value of an option

The amount by which an option is in-the-money. An option which is not in-themoney
has no intrinsic value. Related: in-the-money.

Intrinsic value of a firm

The present value of a firm's expected future net cash flows discounted by the
required rate of return.

Investment value

Related:straight value.

Issued share capital

Total amount of shares that are in issue. Related: outstanding shares.

Limit order book

A record of unexecuted limit orders that is maintained by the specialist. These orders are
treated equally with other orders in terms of priority of execution.

Liquidation value

Net amount that could be realized by selling the assets of a firm after paying the debt.

Loan value

The amount a policyholder may borrow against a whole life insurance policy at the interest rate
specified in the policy.

Management/closely held shares

percentage of shares held by persons closely related to a company, as
defined by the Securities and exchange commission. Part of these percentages often is included in
Institutional Holdings -- making the combined total of these percentages over 100. There is overlap as
institutions sometimes acquire enough stock to be considered by the SEC to be closely allied to the company.

Market value

1) The price at which a security is trading and could presumably be purchased or sold.
2) The value investors believe a firm is worth; calculated by multiplying the number of shares outstanding by the
current market price of a firm's shares.

Market value ratios

Ratios that relate the market price of the firm's common stock to selected financial
statement items.

Market value-weighted index

An index of a group of securities computed by calculating a weighted average
of the returns on each security in the index, with the weights proportional to outstanding market value.

Market-book ratio

Market price of a share divided by book value per share.

Matched book

A bank runs a matched book when the distribution of maturities of its assets and liabilities are equal.

Maturity value

Related: par value.

Multiperiod immunization

A portfolio strategy in which a portfolio is created that will be capable of
satisfying more than one predetermined future liability regardless if interest rates change.

Net adjusted present value

The adjusted present value minus the initial cost of an investment.

Net asset value (NAV)

The value of a fund's investments. For a mutual fund, the net asset value per share
usually represents the fund's market price, subject to a possible sales or redemption charge. For a closed end
fund, the market price may vary significantly from the net asset value.

Net book value

The current book value of an asset or liability; that is, its original book value net of any
accounting adjustments such as depreciation.

Net operating losses

Losses that a firm can take advantage of to reduce taxes.

Net operating margin

The ratio of net operating income to net sales.

Net period

The period of time between the end of the discount period and the date payment is due.

Net present value (NPV)

The present value of the expected future cash flows minus the cost.

Net present value of growth opportunities

A model valuing a firm in which net present value of new
investment opportunities is explicitly examined.

Net present value of future investments

The present value of the total sum of NPVs expected to result from
all of the firm's future investments.

Net present value rule

An investment is worth making if it has a positive NPV. Projects with negative NPVs
should be rejected.

Net salvage value

The after-tax net cash flow for terminating the project.

Neutral period

In the Euromarket, a period over which Eurodollars are sold is said to be neutral if it does not
start or end on either a Friday or the day before a holiday.

Open book

See: unmatched book.

Open-market operation

Purchase or sale of government securities by the monetary authorities to increase or
decrease the domestic money supply.

Open-market purchase operation

A systematic program of repurchasing shares of stock in market
transactions at current market prices, in competition with other prospective investors.

Operating cash flow

Earnings before depreciation minus taxes. It measures the cash generated from
operations, not counting capital spending or working capital requirements.

Operating cycle

The average time intervening between the acquisition of materials or services and the final
cash realization from those acquisitions.

Operating exposure

Degree to which exchange rate changes, in combination with price changes, will alter a
company's future operating cash flows.

Operating profit margin

The ratio of operating margin to net sales.

Operating lease

Short-term, cancelable lease. A type of lease in which the period of contract is less than the
life of the equipment and the lessor pays all maintenance and servicing costs.

Operating leverage

Fixed operating costs, so-called because they accentuate variations in profits.

Operating risk

The inherent or fundamental risk of a firm, without regard to financial risk. The risk that is
created by operating leverage. Also called business risk.

Operationally efficient market

Also called an internally efficient market, one in which investors can obtain
transactions services that reflect the true costs associated with furnishing those services.

Original face value

The principal amount of the mortgage as of its issue date.

Outstanding share capital

Issued share capital less the par value of shares that are held in the company's treasury.

Outstanding shares

shares that are currently owned by investors.

Overperform

When a security is expected to appreciate at a rate faster than the overall market.

Paper

Money market instruments, commercial paper and other.

Paper gain (loss)

Unrealized capital gain (loss) on securities held in portfolio, based on a comparison of
current market price to original cost.

Par value

Also called the maturity value or face value, the amount that the issuer agrees to pay at the maturity date.

Parity value

Related:conversion value

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