Examples of book value in a Sentence
I paid $4,100 for the car four years ago, but its book value is now under $500.
First Known Use of book value
Financial Definition of BOOK VALUE
What It Is
How It Works
Book value is calculated by taking a company's physical assets (including land, buildings, computers, etc.) and subtracting out intangible assets (such as patents) and liabilities -- including preferred stock, debt, and accounts payable. The value left after this calculation represents what the company is intrinsically worth.
Thus, book value is calculated:
Book value = total assets - intangible assets - liabilities
Why It Matters
Since book value represents the intrinsic net worth of a company, it is a helpful tool for investors wanting to determine if a company is underpriced or overpriced, which could indicate a potential time to buy or sell. For instance, value investors search for companies trading for prices at or below book value (indicating a price-to-book ratio of less than 1.0), which implies the shares are selling for less than the company's actual worth.
BOOK VALUE Defined for English Language Learners
Definition of book value for English Language Learners
finance : the amount of money that something (such as a car) is officially worth based on its age, style, condition, etc.
legal Definition of book value
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