What does Book value mean?

The book value of a company stands for the company’s total assets subtracting any liabilities, like debt for instance, or any intangible assets, such as goodwill, or preferred stock. A company’s book value can easily be different than its market value.

It is basically a firm’s common stock equity, just as it would appear on a balance sheet. It is an amount of wealth and assets the company would be left with if it would go out of business at the time of the calculation. Given that the nature of any company is to grow and improve, generating more profit as it expands, market capitalization is higher for most firms than their book value. Since a company’s book value is more stable and can be measured more accurately, for some companies, mostly for those that are not growing rapidly, the book value is of grater importance than to those companies and investors that regard growth as being the key element in a company’s value.

Book value can also mean the worth of an asset just as it would appear on a balance sheet, equaling to the cost of the asset minus any accumulated deprecation.