Book value

 

Book Value equals a company's total assets minus its liabilities.

Book Value (alternately "Net Asset Value" or "Total Equity") is an accounting term generally referring to the the sum of all of a company's assets minus its liabilities. It is found on (or derived from) the balance sheet usually under the synonyms Shareholders' or Stockholders' Equity.

Book Value per Share is a recalculation of the book value, wherein the total book value is divided by the number of shares outstanding. This number is particularly useful in quickly calculating the price to book ratio.

Book Value vs. Tangible Book Value

A company's book value may be significantly affected by intangible assets and/or goodwill. As the values of these assets are significantly more subjective than "hard" assets (such as cash or property, plant and equipment), including them in the calculation of book value may misrepresent the underlying worth of the company. To rectify this, many sources will include a Tangible Book Value, which is the book value minus intangible assets and goodwill (or total assets minus liabilities, intangible assets, and goodwill).

Examples

  • On its balance sheet, company ABC has assets of $500 million and total liabilities of $300 million. Therefore, its book value is $200 million (500 – 300).
  • On its balance sheet, company XYZ lists assets of $450 million, of which $125 million is attributed to intangible assets and $25 million to goodwill. XYZ also lists total liabilities of $200 million. The book value, therefore, is $250 million (450 – 200) while the tangible book value is $100 million (450 – 125 – 25 – 200).
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