Book Value

Book value represents the net value of a company’s assets as recorded on its balance sheet, calculated by subtracting the company’s total liabilities from its total assets. It essentially reflects the value of the company’s equity, or shareholders' equity. Book value is often used as a measure of a company’s intrinsic value, especially in value investing, where investors compare the book value to the market value of the company’s shares to determine whether the stock is under or overvalued. The book value per share (BVPS) is calculated by dividing the total book value by the number of outstanding shares.

Example

A company with $10 million in total assets and $4 million in liabilities has a book value of $6 million. If the company has 1 million shares outstanding, the book value per share would be $6.