TeachMeFinance.com - explain book value
Book Value -- The value of an item or property at a specific time after deducting depreciation from original cost.
book value -- the value of an asset as it appears on the accounting books of an organization. Book value is the initial cost of the asset, less depreciation. Book value may be different from market value, which is the estimated amount the asset would command if sold. Book value also refers to the total value of a company and is computed by adding all assets, then deducting all debts and other liabilities, and deducting the liquidation price of any preferred stock. The book value of a company may be divided by the number of outstanding shares of common stock to get the book value per share of common stock.
Book value -- The book value of a stock is based on the net profits or deficit of the corporation which issued it. It is a frequent practise in quoting bank stocks to give book values as well as market prices. Illustration : If a bank has net profits (accumulated surplus and undivided profits) equal to 75 per cent on the stock then the book value of the stock is the original amount of the stock, 100 per cent, plus the equivalent in net profits, 75 per cent, or altogether 175. On the other hand, if the bank shows no net profits, but instead shows a deficiency equal to, say, 5 per cent on the stock the book value of the stock is only 95. The book value of the stock of a railroad or manufacturing company is ascertained in the same manner as the book value of the stock of a bank.
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