Tangible Book Value (TBV) | Formula + Calculator (2024)

FAQs

How do you calculate tangible book value? ›

Tangible book value is calculated by subtracting intangible assets (intellectual property, patents, goodwill etc.) from the company's book value. Theoretically, PTBV represents the amount of money that shareholders would receive for each share owned if the company were to liquidate its operations.

To calculate TBV, you will need to subtract the company's total liabilities and intangible assets from its total assets. The resulting figure will be the TBV of the company. It is important to note that TBV is just one of many valuation methods used in business.

The ratio can be calculated by taking the share price and dividing it by tangible book value per share. The latter can be derived by dividing the number of shares outstanding by [shareholders' equity less preferred stock and intangible assets].

Once you determine the value of all your assets and the size of all your liabilities, you can use the formula (Tangible Net Worth = Total Assets - Total Liabilities - Intangible Assets) to determine your tangible net worth.

Tangible book value per share (TBVPS) is equal to total tangible net assets divided by the total number of shares outstanding.

Tangible book value (TBV) of a company is what common shareholders can expect to receive if a firm goes bankrupt—thereby forcing the liquidation of its assets at the book value price. Intangible assets, such as goodwill, are not included in tangible book value because they cannot be sold during liquidation.

We exclude preferred shares in the calculation of Tangible Book Value. As with most ratios, it varies a fair amount by industry (companies that require more infrastructure capital will usually trade at P/TB ratios much lower than, for example, consulting firms).

Book value of an asset = total cost - accumulated depreciation. Book value of a company = assets - total liabilities. Book value per share (BVPS) = (shareholders' equity - preferred stock) / average shares outstanding.

A negative book value means that a company has more total liabilities than assets. It owes more in numerical terms, but it's not automatically bad news for investors. There are many factors to consider when assessing whether this may be good, bad or indifferent regarding your investment potential with them.

The P/TBV ratio compares a company's market capitalization to its tangible book value. This ratio is important because it helps investors determine if a company is trading at a fair price. P/TBV ratio is an important tool for comparing companies within an industry.

What is the difference between a book and a tangible book? ›

Tangible book value is the same thing as book value except it excludes the value of intangible assets. Intangible assets, such as goodwill, are assets that you can't see or touch.

The calculation of return on tangible equity (ROTE) consists of dividing a company's net income (the “bottom line”) by its average shareholders' equity, net of any intangible assets such as goodwill.

Tangible net worth is calculated as follows: Locate the company's total assets, total liabilities, and intangible assets, which are all listed on the balance sheet. Take total assets and subtract total liabilities. Take the result and subtract intangible assets.

In the rating exercise, businesses with a TOL/TNW of less than 1 score the maximum amount of points while a TOL/TNW ratio of more than 3 is awarded no points. For most businesses, it would be good to have an average TOL/TNW ratio in the range of 1-2.

The concept of tangible book value (TBV) is the post-liquidation residual net value of a firm that belongs to common shareholders, or the value that remains after all existing liabilities, such as debt, are paid back.

Tangible shareholders' equity = Ordinary shareholders' equity – goodwill – other intangible assets, with equity and asset values reflecting amounts reported in the balance sheet.