What Is Book Value & How Is It Calculated?

Book value is the equity value reported in a company's financial statements. The book value figure is typically seen in relation to the company's stock value (market capitalization) and is determined by subtracting the total value of a company's assets from the liabilities the company currently owes.

What is book value here is the formula:

Book Value = Total Assets + Total Liabilities

While the book value of an asset may remain the same over time based on accounting measurements, the book value of a company may grow collectively due to the accumulation of earnings through asset utilization. Since the book value of a company represents shareholder value, comparing the book value to the market value of shares can serve as an effective valuation technique when trying to decide whether shares are fairly priced. Book value is typically shown per share and is determined by dividing all shareholder equity by the number of common shares outstanding. Book value is considered important from a valuation perspective because it represents a fair and accurate picture of a company's value. This figure is determined using historical company data and is generally not a subjective figure. However, investors and traders would be wise to pay close attention to the nature of the company and other assets that may not be well represented in the book value.   Follow Global Economic Developments on Social Media! Click here to follow Ieconomy official Facebook account! Click here to follow Ieconomy official Instagram account! Click here to follow Ieconomy official Twitter account!