Definition

The book value is basically a measure of the total debts and liabilities subtracted from the total of all current monetary assets. Book value is often synonymous with the net value. Speaking in terms of assets, tangible assets are those that are physically present and available such as owned property, product inventory, cash reserves, receivables and investments. Intangible assets might include things such as patents, trademarks, copyrights and future earnings potential or expected returns. The tangible book value relies on the overall value of those tangible assets rather than intangibles.

Book Value Trading

The book value is often a major consideration in the stock market. Stock analysts look at the overall net worth of a company and divide that net worth figure by the number of shares available. If the company’s stock price is lower than the value per share, that company is said to be trading below book value. Generally speaking, that company would be considered a good investment because it can be purchased for less than its actual computed value.

Reliability

Although the tangible book value is sometimes used as a measure to determine a company’s share value and investment viability, it does not always reveal the entire picture. Even if a company is trading below the current tangible book value, it may be a result of noticeably dwindling profit margins or shareholder mistrust in a company headed for failure.

Personal Book Value

References

Business Dictionary: Tangible Book Value The Motley Fool: The Significance of Book Value Money Terms: Tangible Book Value Per Share Company Refs: Price-to-Tangible Book Value

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