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Encyclopedia > Book value

The book value of an asset or group of assets is sometimes the price at which they were originally acquired (historic cost), in many cases equal to purchase price. In business and accounting an asset is anything owned which can produce future economic benefit, whether in possession or by right to take possession, by a person or a group acting together, e. ... In accounting terminology, historical cost describes the original cost of an asset at the time of purchase or payment as opposed to its saleable value, replacement value or value in present or alternative use. ...

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Net book value

The term is often used interchangeably with "net book value", which is the original acquisition cost, less accumulated depreciation, depletion or amortization. Book value is therefore relevant insofar as it forms the basis of various calculations e.g. of nominal capital gains (current value divided by book value), of amortized value (book value adjusted for depreciation) and of several financial ratios (e.g. price to book value P/BV). Declining-balance depreciation of a $50,000 asset with $6,500 salvage value over 20 years. ... Depletion is the process of running down or reducing the total resource available. ... Amortization may refer to: Amortization (business), the allocation of a lump sum amount to different time periods. ... In finance, a capital gain is profit that is realized from the sale of an asset that was previously purchased at a lower price. ... Declining-balance depreciation of a $50,000 asset with $6,500 salvage value over 20 years. ... A financial ratio is a ratio of two numbers of reported levels or flows of a company. ... The price to equity ratio (price/equity or price/book) is the price per share divided by the shareholders equity per share. ... The price to equity ratio (price/equity or price/book) is the price per share divided by the shareholders equity per share. ...


However, in the price/book ratio, the "book" value is most often not directly any assets or tangible assets, but all balance sheet assets minus all balance sheet liabilites, the balance sheet shareholders' equity. The book value is also called the carrying amount. The price to equity ratio (price/equity or price/book) is the price per share divided by the shareholders equity per share. ... In business and accounting, the shareholders equity refers to the amount of assets that are owned by a companys shareholders. ...


Value when?

Book value of an asset can be very different from the current price e. g the market price. Book values can thus be misleading because for many purposes, e.g. individual investment decisions and business decisions in going concerns, historic cost and/or book value can be irrelevant to the decisions being made. That is, decisions should be based on current (replacement) costs and expected future developments. Market price is an economic concept with commonplace familiarity; it is the price that a good or service is offered at, or will fetch, in the marketplace; it is of interest mainly in the study of microeconomics. ... In accounting terminology, historical cost describes the original cost of an asset at the time of purchase or payment as opposed to its saleable value, replacement value or value in present or alternative use. ...


In valuation

Book value of a firm -- that is the total of the net book value of all of the firm's assets -- is generally lower than the market capitalization of a firm, because the value assigned by the market is generally understood to be based on the discounted value of future earnings and takes account of factors such as the productive capacity of the assets, the expertise of employees and the value of brands. In non-asset-intensive industries (such as high-technology or service industries), book value is generally much lower than market capitalization. Market capitalization, often abbreviated to market cap, is a business term that refers to the aggregate value of a firms outstanding common shares. ...


In the price/book value ratio the "book value" is simply the shareholders' equity from the "books", or, the balance sheet. The price to equity ratio (price/equity or price/book) is the price per share divided by the shareholders equity per share. ... In business and accounting, the shareholders equity refers to the amount of assets that are owned by a companys shareholders. ... A balance sheet, in formal bookkeeping and accounting, is a statement of the book value of a business or other organization or person at a particular date, often at the end of its fiscal year, as distinct from an income statement, also known as a profit and loss account (P...


See also

In economics, mark to market is the act of assigning a value to a position held in a tradeable financial instrument based on the current market price for that instrument. ... In business and accounting, the shareholders equity refers to the amount of assets that are owned by a companys shareholders. ... Capital formation is a term used in national accounts statistics and macroeconomics. ... Fixed capital is a concept in economics and accounting, first theoretically analysed in some depth by the economist David Ricardo. ...

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  Results from FactBites:
 
Book value - Wikipedia, the free encyclopedia (267 words)
Book value is therefore relevant insofar as it forms the basis of various calculations e.g.
However, in the price/book ratio, the "book" value is most often not directly any assets or tangible assets, but all balance sheet assets minus all balance sheet liabilites, the balance sheet shareholders' equity.
In the price/book value ratio the "book value" is simply the shareholders' equity from the "books", or, the balance sheet.
  More results at FactBites »

 
 

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