The amount of net assets belonging to the owners of a business(or shareholders of a company) based on a statement of financial position values. It represents the total value of the company’s assets that shareholders would theoretically receive if a company were liquidated. Also represents the original cost of the units allocated to a segregated fund contract.
What is Book Value?
Book value is an accounting term that refers to the value of an asset as recorded on a company’s balance sheet. It represents the original cost of the asset, less any accumulated depreciation, amortization, or other reductions in value over time.
The book value of a company is calculated by subtracting its total liabilities from its total assets. This gives a measure of the company’s net worth and provides a snapshot of its financial position at a specific point in time.
For individual assets, such as a piece of equipment or a vehicle, book value represents the amount that the asset is recorded as worth on the company’s balance sheet. The book value may differ from the market value of the asset, which represents the current price the asset could be sold for in the market.
Book value is often used as a benchmark for comparison to the market value of a company or its assets. If the market value of a company is higher than its book value, it suggests that the company is financially strong and that its assets are worth more than what is reflected on its balance sheet. Conversely, if the market value of a company is lower than its book value, it suggests that the company may be facing financial difficulties.
