Book Value

Finance

Quick Definition

Book Value is the net value of a company’s assets after subtracting liabilities, as recorded in its financial statements.

Detailed Explanation

Book Value represents the intrinsic value of a company based on accounting records. It shows what shareholders would theoretically receive if the company liquidates its assets and pays off all liabilities.

It is derived from the company’s balance sheet and is widely used by investors for valuation analysis.

Formula

👉 Book Value = Total Assets – Total Liabilities

Book Value Per Share (BVPS)

👉 BVPS = Book Value ÷ Total Number of Shares

Why Book Value Matters

  • Helps assess company’s financial health
  • Used in valuation ratios (like P/B ratio)
  • Indicates underlying asset value

Book Value vs Market Value

  • Book Value: Based on accounting records
  • Market Value: Based on stock price

Interpretation

  • Market Price < Book Value: May indicate undervaluation
  • Market Price > Book Value: Market expects growth

Example

"If a company has ₹100 crore assets and ₹60 crore liabilities: 👉 Book Value = ₹40 crore"

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