News Summary

• Also, book value is an important matter for banks, since they are required to maintain it at a certain level.Ninety years ago, when the value guru Benjamin Graham published his seminal tome Security Analysis, book value was visible in the factories, warehouses and inventory of American business.
• A few years before that book came out Graham published a commentary in Forbes lamenting how many stocks were trading on the New York Stock Exchange not only below book value, but below the liquidating value of their quick assets (cash, inventories and receivables less all debts).
• By 2000 Graham’s most famous disciple, Warren Buffett, was telling his shareholders that he didn’t pay much attention anymore to the ratio.When a corporation buys in its own shares, paying more than their book value, it shrinks the book value of the remaining shares, sometimes below zero.
• But book value doesn’t capture the economy’s most valuable assets: software, drug patents, business networks and brands, the main exception occurring when one company buys another and records some of the purchase price as an intangible asset called goodwill.
• McDonald’s, Dell Technologies and Starbucks are thriving companies with negative book value; McDonald’s even rates an A++ financial strength rating from Value Line.
• Equivalently, divide the share price by the book value per share.Is the ratio less than 1?