Sorry for the noob question . I am new to market and saw that sbi has much larger balance sheet than HDFC , but HDFC market cap is double of SBI. Can someone elaborate the reasons here?
You are getting confused .
There is no 1 to 1 corelation between BALANCE SHEET & MARKET CAP
What is book value?
Imagine a company selling all its assets (buildings, equipment, inventory) and paying off all its debts. The book value, also known as net asset value (NAV), represents the theoretical amount of money that would be left for shareholders in such a scenario. It’s essentially a company’s net worth as reflected on its balance sheet.
Calculating Book Value:
Book value is calculated using a simple formula:
Book Value = Total Assets - Total Liabilities
What is market value?
Market value, on the other hand, reflects the collective opinion of investors about a company’s worth. It’s determined by the current price at which a company’s stock trades in the market. Market value is essentially a forward-looking metric, reflecting not just the company’s current assets and liabilities, but also its future growth potential, profitability, and overall market sentiment.
Book value vs. market value
Here’s a table summarising the key differences between book value and market value:
| Feature | Book Value | Market Value |
|---|---|---|
| Definition | Net assets of a company after liabilities | Current price investors are willing to pay |
| Calculation | Total Assets - Total Liabilities | Stock Price x Number of Outstanding Shares |
| Focus | Historical data (assets & liabilities) | Future growth potential & market sentiment |
| Limitations | Doesn’t account for intangibles (brand, etc.) | Can be volatile and susceptible to market swings |
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Trust.
so HDFC,s book value is greater?
