Adjusted Book Value

AAA

DEFINITION of 'Adjusted Book Value'

A measure of a company's valuation after liabilities, including off-balance sheet liabilities, and assets are adjusted to reflect true fair market value. The potential downside of using an adjusted book value is that a business could be worth more than its stated assets and/or liabilities because it fails to value intangible assets, account for discounts or factor in contingent liabilities. It is not often accepted as an accurate picture of a profitable company's operating value, however it can be a way of capturing potential equity available in a firm.

INVESTOPEDIA EXPLAINS 'Adjusted Book Value'

There are literally dozens of methods an investor can use to assign value or price to a business. Deciding which form of valuation method to use involves several factors such as the firm type and availability of information.


The adjusted book value method of valuation is most often used to assign value to distressed companies facing potential liquidation or companies that hold tangible assets such as property or securities. Analysts may use adjusted book value to determine a bottom line price for a company's value when anticipating bankruptcy or sale due to financial distress.

VIDEO

RELATED TERMS
  1. Market Value

    The price an asset would fetch in the marketplace. Market value ...
  2. Adjusted Net Asset Method

    A business valuation procedure used in acquisition accounting ...
  3. Business Valuation

    The process of determining the economic value of a business or ...
  4. Book Value

    1. The value at which an asset is carried on a balance sheet. ...
  5. Fair Market Value

    The price that a given property or asset would fetch in the marketplace, ...
  6. Asset

    1. A resource with economic value that an individual, corporation ...
Related Articles
  1. Analyze Investments Quickly With Ratios
    Investing Basics

    Analyze Investments Quickly With Ratios

  2. Target Prices: The Key To Sound Investing
    Economics

    Target Prices: The Key To Sound Investing

  3. Relative Valuation Of Stocks Can Be ...
    Markets

    Relative Valuation Of Stocks Can Be ...

  4. What Is The Impact Of Research On Stock ...
    Investing Basics

    What Is The Impact Of Research On Stock ...

comments powered by Disqus
Hot Definitions
  1. Walras' Law

    An economics law that suggests that the existence of excess supply in one market must be matched by excess demand in another ...
  2. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  3. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  4. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  5. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  6. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
Trading Center