Book Value

The book value or BV of a company is the value of the true assets carried by a company. This gives you the amount of assets a share holder would theoretically receive if a company was liquidated.

The formula for a book value is

BV= total assets-accumulated depreciation

What this actually means is assets minus intangible assets. For instance if a company has $50 million dollars worth of assets but $20 million of it is intangible the company has a book value of $30 million.

By comparing a company’s market value with its BV we can determine if a stock is a good by or a bad buy.

In the past this was used much more often. Now however investors are more concerned with a company’s earnings. That has made this study a little less reliable, but it still is an important part of investing and should be checked out before buying a stock.