Book Value

Book value is the net worth of a company according to its balance sheet, calculated as total assets minus total liabilities. It represents, in theory, what would be left for shareholders if the company sold everything and paid off all debts. Book value per share divides this figure by shares outstanding.

Use book value as a baseline for valuation, especially for asset-heavy businesses like banks and industrials. Comparing market price with book value via the price-to-book ratio shows how much investors pay above net asset value. Book value is less useful for asset-light companies whose value lies in brands or intellectual property.

A company with 500 million dollars in assets and 300 million dollars in liabilities has a book value of 200 million dollars. With 100 million shares outstanding, the book value per share is 2 dollars.