University School of Business

Bachelor of Business
Administration
Security Analysis and Portfolio Management
23BAT-241
Mr. Virender Thakur

Balance Sheet Technique DISCOVER . LEARN .

EMPOWER
Valuation Of Securities
Course Objective

To develop understanding of different concepts

relating to analysis of investment and portfolio
management
Course Outcome
CO1
To understand different avenues of investment and to equip the knowledge of security
analysis.

CO2
To illustrate the concepts and theories of portfolio management for better investment. Source: https://www.digitalstudycenter.com/2015/05/security-valuati
on.html
CO3
To compare the investment alternatives and portfolio management theories.

CO4
To summarize the decisions for investment and comparison of portfolios for their results with
the predefined objectives

CO5
To adapt a model for portfolios using traditional concept or by using modern concept to get
more returns.

2
 Balance Sheet Valuation
Techniques
1. Book Value
2. Liquidation Value
3. Replacement Cost
 (A) Balance Sheet Valuation
(1) Book Value: The book value per share is
simply the net worth of the company (which is
equal to paid up equity capital plus reserve and
surplus) divided by number of outstanding
equity shares.
Example: Net worth of company A Ltd. Is 37
million. Number of outstanding equity shares is
2 million. The book value of equity share is Rs.
18.5 million (Rs. 37 million/2 million)
(2) Liquidation value: The liquidation value per
share is equal to: (Value realized from liquidating
all the assets of firms – amount to be paid to all
creditors and preference shareholders)
divided by number of equity shareholders .
Example: Pioneer industries would realise Rs. 45
million from the liquidation of its assets and pay
Rs. 18 million to its creditors and preference
shareholders. Number of equity shareholders are
1.5 million.
Continue…..
(3) Replacement cost: Another balance sheet measure
considered by analyst is valuing a firm is the
replacement cost of its assets less liabilities and
divided by number of equity share. The use of this
measure is based on the premise that the market value
of a firm cannot deviate too much from its replacement
cost. If it did so, competitive pressure will tend to align
the two.
Example: Replacement cost of assets is 40 million and
liabilities of companies are 30 million. Number of
share equity share 2 million. Then the value per share is
(40-30/2) = 5 million
 APPLICATIONS

It provides a basic knowledge of theories and

practices of investment management and security
analysis. It familiarizes with the concept such as
risk calculation and diversification in portfolio. It
helps to the know the different approaches to
security analysis namely fundamental analysis,
industry analysis and company analysis.

8
 References
 S.Kevin: Security Analysis and Portfolio Management,
PHI Learning.
 Punithavathy Pandian: Security Analysis and Portfolio
Management, Vikas House Publisher.
 Prasanna Chandra: Investment Analysis and Portfolio
Management, McGraw Hill Education
 Stephen Lofthouse, Jane Raybould: Investment
Management, John Wiley & Sons Publications.
 Amling Fredrick: Investment- An Introduction to
Analysis and Management, Prentice Hall India.
 Donald E. Fischer and Ronald J. Jordan: Security
Analysis and Portfolio Management, Pearson Education.
THANK YOU

For queries
Email: virender.usb@cumail.in