Book Value
Book value refers to the total value of a company's assets that shareholders would theoretically receive if a company were liquidated, all its debts were paid off, and its assets were sold at the values listed on the company's balance sheet. It's also known as "net asset value" or "carrying value."
Mathematically, book value can be calculated by subtracting a company's total liabilities from its total assets:
Book Value=Total Assets−Total Liabilities
Book Value=Total Assets−Total Liabilities
Book value is typically recorded on the balance sheet and represents the historical cost of assets minus accumulated depreciation, depletion, or amortization. It's important to note that book value may not accurately reflect the market value of a company's assets, especially if the assets have appreciated or depreciated significantly since they were acquired.
Book value is often used as a fundamental metric for analyzing stocks, especially in value investing strategies, where investors look for stocks trading at a discount to their book value per share. However, in certain industries or during economic downturns, book value may not fully capture the value of a company's assets, such as intangible assets like intellectual property or brand value.
Last MaintainedFebruary 2024