How an Equity’s Market Value is Calculated?
The market value of equity can be calculated with the help of a simple formula.
Market Value of equity = Number of outstanding shares X the current price of 1 share
For example, if a company “X” is trading at $500/share and has 10,000 outstanding shares, then the market value of equity will be $500 X 10,000 = $5,00,0000 ($5 million).
What is Equity? How It Works, How to Calculate It, Types
A company’s total worth or the amount that a company has put into it is often referred to as equity. However, the actual valuation of equity can be done with the help of its market value and book value. A book value of equity is mentioned in the balance sheet of a company, while on the other hand, the market value of equity is the actual value of outstanding shares of a company. However financial analysts use both the market value and a book value of equity to determine its potential.