The company’s book value is derived through an analysis of their Balance Sheet. Add up all of the Tangible Assets (including real estate, inventory, etc) and then subtract the all of the liabilities (including corporate debt, money owed to vendors, etc). Whatever is left over is the Book Value. Divide this Book Value by the number of shares outstanding and you know the value each share would have if the company were to go out of business. If the market value of the firm is trading for less than the book value, the stock might be a good target for an acquisition.
The Book Value does not reveal the value of the intangible assets like patents and intellectual property. When a company is acquired, the difference between the book value and the market value good-will; including value associated with brand recognition, market share and human capital.
Market value per share/Book Value per share = Tobin’s Q
