Book value is what the accounting records say equity is worth after debts are subtracted from assets. Divide by shares outstanding and you get book value per share. Markets often price companies above or below book value because investors care about future earnings, brand strength, and asset quality, not only historical cost.
Key takeaways
- Book value comes from the balance sheet, not from the live share price.
- Price-to-book compares market value with this accounting equity figure.
- Intangible-heavy firms can have book values that understate economic worth.
- Write-downs and asset revaluations can change book value without any trading.