Company Book Value: Definition, Calculation & Comparison to Market Value
Learn what the book value of a company is, how to calculate it, and how it differs from market value. Understand total assets, liabilities, and net asset value for investors and financial analysis.
What Is Company Book Value?
The book value of a company represents the net value of a business according to its balance sheet.
It is calculated as the total assets minus total liabilities, reflecting the value that would theoretically remain for shareholders if the company were liquidated.
Book value gives investors and analysts a snapshot of a company’s net worth based on accounting records, as opposed to its market value, which fluctuates with stock prices.
Understanding book value is important for evaluating whether a company is overvalued or undervalued relative to its market price.
Company Book Value vs Market Value
This comparison highlights that company book value often diverges significantly from market value, especially in sectors dominated by intangibles such as technology or pharmaceuticals.
How to Find the Book Value of a Company
To find the book value of a company, you start with its total assets and subtract its total liabilities:
Book Value = Total Assets – Total Liabilities
This includes tangible assets like property, equipment, and inventory, as well as intangible assets such as patents or trademarks. Liabilities encompass debts, loans, and other financial obligations.
The resulting figure represents the company’s net asset value, often used in financial analysis and investment decisions.
For public companies, book value can also be expressed on a per-share basis by dividing total book value by the number of outstanding shares.
