# How to Calculate Per-Share Equity Value

The shareholders’ equity is equal to the retained earnings plus the paid-in capital. The retained earnings is equal to the net income that's left after paying dividends. The paid-in capital is the par value of the stock that's issued and outstanding, plus the excess amount paid by investors, minus the stock issuance costs. The per-share equity — or equity per share or book value per share — calculation depends on whether the corporation has any preferred shares outstanding.

## Step 1.

Get the total shareholders’ equity amount from the company balance sheet. You can also calculate it by subtracting liabilities from assets — both balance sheet items.

## Step 2.

Calculate the equity per preferred share. This is equal to the call price plus the dividends in arrears. A preferred share is issued at a par value, pays a dividend according to a specified rate based on the par value, and can be redeemed by the issuer at a specified call price. Dividends in arrears refers to the dividends that haven't been paid. For example, if there are 100 issued shares of 5 percent $100 par-value preferred stock with a call price of $105, and the dividends are two years in arrears, the equity per preferred share is $105 plus $10, or $115. The total preferred equity is 100 multiplied by $115 or $11,500.

## Step 3.

Calculate the equity per common share. First subtract the preferred equity from the total shareholders’ equity; the result is the total common equity. Divide it by the number of outstanding common shares to get the equity value per common share. To wrap up the example, if total shareholders’ equity is $100,000, the common equity is $100,000 minus $11,500 or $88,500. If there are 1,000 common shares outstanding, the equity per common share is equal to $88,500 divided by 1,000, or $88.50.

## Tip

Equity per common share isn't necessarily the same as the market price per share.

When there are no preferred shares, the equity per share is simply the shareholders’ equity divided by the number of common shares issued and outstanding.