It is easy to understand why this happens. For instance, when we buy a slice of cake, it is based on the price of the slice, we might not think of calculating how much we are paying for the entire cake. We start comparing slices of one cake with another without looking at its different weight and the per kg value of each cake.
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That may be OK with cakes but not with equity shares. But when we compare the market value of equity, it is clear that Visa is a bigger company. Visa is bigger than Master Card in terms of its market capitalization.
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How to Calculate Market Price Per Share
Market Value. Share it in comments below. Hence, it has to be calculated. What is the definition of market value of debt? Firms report the book value of debt on their financial statements and not their bank debt. Also, the market value of debt helps analysts to calculate the enterprise value of a firm, which is higher than the market cap if the company carries a lot of debt.
The big question about any stock is whether the shares are worth buying.
The different market value ratios use different formulas to determine that. Market value per share is simply the current market price the stock sells for. Investors have many ways to judge the value of a stock. Market value ratios are useful because they use an objective market value formula rather than subjective standards:.
Market Value Balance Sheet and Analysis
Investors use different market value ratios because they have different questions they want to be answered. As a rule, the market value per share is whatever the stock currently trades at. That trading price is usually based on several underlying factors:.
If the company trades publicly on the stock exchange, they have to make their audited financial statements, including the balance sheet, the cash flow statement and the income statement, available to the public. Investors can use the information in the statements to determine cash flow, income and other things influencing the market value.
The problem with using any market value formula to judge stocks is that many things can skew the formula and give a wrong answer.
Market value per share is no exception. There are many tricks companies and conniving investors can use to artificially inflate market value. This is particularly true if the company doesn't trade shares on a stock exchange or very few shares are up for sale. With a statistically small sample of genuine stock sales, an unscrupulous trader can easily pump up the market value with a few trades.
Related Calculation of Maket Value Balance sheet
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