Book value

The value of a business, or of an individual asset, as carried on the balance sheet - historical cost less accumulated depreciation, rather than any market estimate.

Example

Northgate's book value is its equity of 2,005,000, whatever a buyer might actually pay for it.

Important

Book value is a record of what was spent, not a view of what something is worth. A high return on a small book value can mean an asset-light business or years of past losses, and those are opposites.

Related terms

• Shareholders' equity — What is left for the owners once every liability is subtracted from every asset. Usually made up of the capital owners put in plus the profits the business has kept.
• Return on equity — Net profit divided by shareholders' equity - what the owners earned on the capital recorded as theirs.
• Balance sheet — A statement of everything a business owns and everything it owes at one specific moment. What is left after subtracting the second from the first belongs to the owners.

Lessons that explain it

• The balance sheet: what it owns and what it owes — A photograph taken on one specific day, showing what the business has, who has a claim on it, and what is left over for the owners. It is the statement that tells you whether a bad year is survivable. (13 min)

All 578 terms in the Investing glossary