How to Calculate the Value of Shares

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Valuing shares can be done in two ways. The first is the value found on an openly traded market, such as the stock price on the stock market. The other way, more commonly used, utilizes the firm's financial statements to determine the value of the shares. This is the amount a shareholder will receive if the firm no longer does business and sells its assets and pays its liabilities.

  • Locate figures for the total stockholders' equity, preferred equity, and the total common shares outstanding. The company reports total stockholders' equity on the balance sheet as stockholders' equity. Stockholders' equity also equals total assets minus total liabilities. Preferred equity is the amount of preferred stock a company has at its par value. The total common shares outstanding are the number of common stock shares that are sold. For example, a firm has $500,000 in total stockholders' equity, $100,000 in preferred stock, and 200,000 common shares outstanding.

  • Subtract preferred equity from total stockholders' equity. This removes any claims to the business that supersede common shareholders' claims. In the example, $500,000 minus $100,000 equals $400,000.

  • Divide the number calculated in Step 2 by the number of common shares outstanding to determine the value per share. In the example, $400,000 divided by 200,000 shares equals $2.00 per share.

References

  • Photo Credit balance sheet image by Darko Draskovic from Fotolia.com
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