Book Value

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DEFINITION of 'Book Value'

1. The value at which an asset is carried on a balance sheet. To calculate, take the cost of an asset minus the accumulated depreciation.

2. The net asset value of a company, calculated by total assets minus intangible assets (patents, goodwill) and liabilities.

3. The initial outlay for an investment. This number may be net or gross of expenses such as trading costs, sales taxes, service charges and so on.

Also known as "net book value (NBV)."

In the U.K., book value is known as "net asset value."

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BREAKING DOWN 'Book Value'

Book value is the accounting value of a firm. It has two main uses:

1. It is the total value of the company's assets that shareholders would theoretically receive if a company were liquidated.

2. By being compared to the company's market value, the book value can indicate whether a stock is under- or overpriced.

3. In personal finance, the book value of an investment is the price paid for a security or debt investment. When a stock is sold, the selling price less the book value is the capital gain (or loss) from the investment.

For more information, check out Digging Into Book Value

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