Book Value

• Author: Jeffrey Lehman, Shirelle Phelps

Page 79

The current value of an asset. The book value of an asset at any time is its cost minus its accumulated depreciation. (Depreciation reflects the decrease in the useful life of an asset due to use of the asset.) Companies use book value to determine the point at which they have recovered the cost of an asset.

The net asset value of a company's SECURITIES. This is calculated by subtracting from the company's total assets the following items: intangible assets (such as goodwill), current liabilities, and long-term liabilities and EQUITY issues. This figure, divided by the total number of bonds or of shares of stock, is the book value per bond or per share of stock.

The calculation of book value is important in determining the value of a company that is...