Reading the accounts
Book value
Also called Shareholders’ equity or Net assets
What the balance sheet says shareholders own: total assets minus total liabilities.
How it works
Book value is an accounting figure, not a market one. It reflects historic costs and accounting rules rather than what the assets would fetch.
It is most meaningful where assets are financial or recently valued, and least meaningful where a company’s value comes from things never recorded as assets.
Formula
Book value = total assets − total liabilitiesRelated terms
- Price-to-bookMarket value divided by the accounting value of the company’s net assets.
- Tangible book valueBook value with goodwill and other intangibles removed.
- Return on equityNet income as a percentage of shareholders’ equity — profit earned on the owners’ capital.
- Balance sheetA snapshot of what a company owns and owes at one moment in time.
Mentioned in
More in Reading the accounts
- Breakeven
- Capital expenditure
- Audit opinion
- Cash burn
- Cash conversion cycle
- Adjusted earnings
- Cash flow statement
- Accrual accounting
All 51 Reading the accounts terms · The full glossary, 433 terms
Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.