What is an 'Adjusted Book Value'
An adjusted book value is 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.
BREAKING DOWN '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.