I recently read a motley fool article about book value, and i decided to follow up on this line of thought to show how to use book value in investing decisions by definition, book value is total. Net asset book value legal definition of net asset book. Book value means, with respect to any asset at any time, the value thereof as the same would be reflected on a consolidated balance sheet of the company and its consolidated subsidiaries as at such time prepared in accordance with gaap. There are several definitions associated with the term book value and depending on the context of its use, determines the correct definition and proper use. Book value also carrying value is an accounting term used to account for the effect of depreciation on an asset. Net book value financial definition of net book value. Book value is the value of a single share of stock, calculated by dividing the value of the company by the number of shares it has issued. The monetary amount by which an asset is valued on a companys balance sheet, a figure not necessarily identical to the amount the asset could bring. It is important to realize that the book value is not the same as the fair market value because of the accountants historical cost principle and matching princi.
In both cases, the book value is essentially the sale value for physical assets, less any associated costs or obligations. A conservative approach to evaluating a companys worth is to calculate tangible book value, also called net tangible assets. That is, it is a statement of the value of the companys assets minus the value of its. Book value is the net asset value nav of a companys stocks and bonds. Depreciated book value law and legal definition uslegal, inc. A companys book value might be higher or lower than its market value. Net book value definition in the cambridge english. Book value is strictly an accounting and tax calculation. Dec 14, 2018 the book value of an asset is the value of that asset on the books the accounting books and the balance sheet of the company.
A comprehensive, legal definition of obscenity has been difficult to establish. Market value is the worth of a company based on the total. The result tells you what the tangible worth equals after liabilities are subtracted from tangible assets. Book value is the value of an asset, liability or equity as it appears on the balance sheet.
Stock, corporate value or balance sheet simply stated as the equity value of a company divided by the number of shares held by investors. Book value is the term which means the value of the firm as per the books of the company. Dictionary and exercise book on contract drafting this book is a combination of our legal dictionary and exercise book on drafting commercial contracts. Market value definition of market value by the free. Book value is equal to the companys total assets less intangible assets, preferred stock and liabilities. They were asked to pay about ten times the book value of the stock.
Net book value in accounting, an assets original price minus depreciation and amortization. Book value is often used interchangeably with net book value or carrying value, which is the original acquisition cost less accumulated depreciation, depletion or amortization. Book value dictionary definition book value defined. Book value is the value at which the assets of a business are carried on the companys books. Book value is the total value of a business assets found on its balance sheet, and represents the value of all assets if liquidated. Definition of book value in accounting, book value refers to the amounts contained in the companys general ledger accounts or books. The cost price of the personal property acquired includes.
Book value is determined in accordance with the applicable accounting framework such as. When a landowner pays taxes on her real estate, part. Depreciated book value means the cost price of the personal property acquired less the depreciation set up on the books in a regular and consistent manner for reflecting such depreciation, including a reasonable allowance for obsolescence. Book value or carrying value is the net worth of an asset that is recorded on the balance sheet. Net book value the current book value of an asset or liability. Brokerdealer day trader floor broker floor trader investor market maker proprietary trader quantitative analyst financial law.
Depreciated book value law and legal definition uslegal. Book value definition and meaning collins english dictionary. The book value of an asset at any time is its cost minus its accumulated depreciation. Over 150 international legal english terms and phrases for lawyers and law students around the world.
Finding the nav involves subtracting the companys short and longterm liabilities from its assets to find net assets. Definition of value is integral to real estate valuation and is one of several assignment elements identified in the uniform standards of professional appraisal practice uspap. This is not an indication of the companys fair market value. Value definition is the monetary worth of something. One book entitled ulysses, which determined that a work investigated for obscenity must be considered in its entirety and not merely judged on its parts. Net asset value in stocks and businesses, an expression of the underlying value of the company. Book value legal definition of book value by law insider. The book value of a fixed asset is arrived at by subtracting accumulated depreciation from the cost of the asset. Book value is calculated by subtracting any accumulated depreciation from an assets purchase price or historical cost. This may not be the true value of the corporation or its shares since the assets may be under or overvalued. When six parties are bidding on the same piece of real estate, it can become a matter of needing to win, rather than making a good.
Book value meaning in the cambridge english dictionary. In accounting, book value refers to the amounts contained in the companys general ledger accounts or books. Book value of a whole business equals the book value of its total assets minus the book value of its total liabilities. The formula is the companys assets minus liabilities, intangible assets and the value of preferred stock. Blue book value financial definition of blue book value. Book value of an asset is the value at which the asset is carried on a balance sheet and calculated by taking the cost of an asset minus the accumulated depreciation.
The amount of owners equity or stockholders equity reported on a companys balance sheet. The term was originally mostly used in relation to works of art but is now used in similar senses in a wide range of fields, including archaeology, paleontology, archives, manuscripts, printed books and. People often use the term net book value interchangeably with net asset value nav, which refers to a companys total assets minus its total liabilities. The market value of the company can be less than or more than its book value.
Book value dictionary definition book value defined yourdictionary. Obscenity wex us law lii legal information institute. Its important to note that the book value is not necessarily the same as the fair market value the amount the asset could be sold for on the open market. Book value definition, the value of a business, property, etc. The book value of a company is the total value of the companys assets, minus the companys outstanding liabilities. The book value is essentially the tangible accounting value of a firm compared to the market value that is shown. Municipalities base personal property tax assessments for such items as machinery and equipment, furniture and fixtures, and computer equipment on the. Net book value is the value at which a company carries an asset on its balance sheet. While small assets are simply held on the books at cost, larger assets like buildings and. Market value definition of market value by the free dictionary. The pricetobook ratio, or pb ratio, is a financial ratio used to compare a companys book value to its current market price and is a key metric for value investors. Then youd divide the net assets by the number of shares of common stock, preferred stock, or bonds to get the nav per share or per bond. Depreciated book value law and legal definition depreciated book value means the cost price of the personal property acquired less the depreciation set up on the books in a regular and consistent manner for reflecting such depreciation, including a reasonable allowance for obsolescence.
Companies use book value to determine the point at which they have recovered the cost of an asset. Book net worth means, at any time, the sum of the following for the borrower and its subsidiaries on a consolidated basis. Book value may also refer to the net worth of a business, which is calculated by subtracting liabilities from assets. The buyback price was 38% below the stocks book value. Over time, this amount may be depreciated giving a lower amount. The book value definition refers to a companys value or net worth that is recorded on its financial statement. The value of an asset or liability as it is recorded on the books. Depreciation reflects the decrease in the useful life of an asset due to use of the asset. The book value of an asset is its cost minus any depreciation. Book value of a firm, in an ideal world, represents the value of the business the shareholders will be left with if all the assets are sold for cash and all debt is paid off today. For the initial outlay of an investment, book value may be net or gross of expenses such as trading costs, sales taxes, service charges and so on. In accounting, book value is the value of an asset according to its balance sheet account. A method of valuing a corporations stock or a companys worth by adding up the stated value of assets as. This may not be the true value of the corporation or its shares since the assets m.
Book value can also be thought of as the net asset value of a company calculated as total assets minus intangible assets patents, goodwill and liabilities. Book value refers to the accounting value of an asset or company. Information and translations of book value in the most comprehensive dictionary definitions resource on the web. Search for a definition or browse our legal glossaries. Book value denotes the portion of the company held by the shareholders. The market value of an article or piece of property is the price which it might be expected to bring if offered for sale in a fair market. It is equal to the cost of the asset minus accumulated depreciation.
Book value is a key measure that investors use to gauge a stocks valuation. Book value or net book value is the value at which an asset is carried on a companys balance sheet. Provenance from the french provenir, to come fromforth is the chronology of the ownership, custody or location of a historical object. The term was originally mostly used in relation to works of art but is now used in similar senses in a wide range of fields, including archaeology, paleontology, archives, manuscripts, printed books and science and computing.
When a company records its assets in its accounts these are usually initially included at cost. Book value can also represent the value of a particular asset on the companys balance sheet after taking accumulated depreciation into account. Mar 19, 2020 book value is the total value of a business assets found on its balance sheet, and represents the value of all assets if liquidated. The easiest way to know how much your copy of a book is worth on the open market is to check on how much similar copies are currently being offered for. Price to book value is a valuation ratio that is measured by stock price book value per share. Owners can also benefit from personal property valuation studies, which take into consideration market value, as well as the owners financial statements and the propertys net book value. If a company is trading at a market value which is lower than its book value, it usually indicates that the market has momentarily lost confidence in the company. In the united kingdom, the term net asset value may refer to the book value of a company. It may be due to problems with the business, loss of important businessrelated lawsuits. Book value means, with respect to any asset and any liability assumed, the dollar amount thereof stated on the accounting records of the failed bank. In business, the book value of an asset is the value it is given in the account books of. Definition of book net worth book net worth means the aggregate of the common and preferred shareholders equity in the borrower, determined in accordance with gaap.
It is also the value of a company or a corporation by adding up the recorded value of the asse. Book value definition of book value by the free dictionary. Book value definition of book value by merriamwebster. The book value of a company is the total value of all its physical assets, which excludes any intangible assets, minus its liabilities. Book value a companys total assets minus intangible assets and liabilities, such as debt. Book value refers to the total amount a company would be worth if it liquidated its assets and paid back all its liabilities. Land value is the measure of how much a plot of land is worth, not counting any buildings but including improvements such as better drainage. It is important to realize that the book value is not the same as the fair market value because of the accountants historical cost principle and matching principle.
Book value definition is the value of something as shown on bookkeeping records as distinguished from market value how to use book value in a sentence. Fill out this form with enough information to get a list of comparable copies. The amount that a seller may expect to obtain for merchandise, services, or securities in the open market. The findlaw legal dictionary free access to over 8260 definitions of legal terms. It is therefore a much more conservative way of valuing a company than using earnings based model where one needs to estimate future earnings and growth.
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