Book Value

What Is Book Value?

Book value is the value of an asset as it appears on a company’s balance sheet, calculated by subtracting accumulated depreciation from the original purchase cost. It also refers to the net asset value of a company, calculated as total assets minus total liabilities.

Key Takeaways

  • Definition: The value of an asset on the balance sheet. 
  • Formula: Original cost – accumulated depreciation. 
  • Company Value: Total assets – total liabilities.

Book Value of an Asset

  • Original Cost: The purchase price of the asset. 
  • Accumulated Depreciation: The total depreciation expense recorded for the asset over time. 
  • Calculation: Book value = Original cost – accumulated depreciation.

Book Value of a Company

  1. Total Assets: Sum of all assets owned by the company. 
  2. Total Liabilities: Sum of all debts and obligations. 
  3. Calculation: Book value = Total assets – total liabilities. 

Importance of Book Value

Book value provides insights into the value of a company’s assets and its overall financial health. It is used by investors to assess whether a stock is undervalued or overvalued based on the company’s net asset value. 


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