Definition
Book value equals total assets minus total liabilities, representing the theoretical liquidation value of the company. Book value per share is used in the P/B ratio. Tangible book value further excludes intangible assets like goodwill, providing a more conservative floor value.
functions Formula
Book Value = Total Assets − Total Liabilities
lightbulb Example
Total assets are $200M and total liabilities are $120M. Book value = $80M. With 10M shares outstanding, book value per share = $8.00.
verified_user Key Points
- Represents theoretical liquidation value
- Tangible book excludes goodwill and intangibles
- Asset-heavy companies have more meaningful book values
- Market value often diverges significantly from book value