Dictionary / Financial statements
What Is Book Value?
Book value is what a company is worth on paper: everything it owns minus everything it owes. It is also called shareholders' equity.
How to calculate book value
Total assets−Total liabilities=Book value
Divide it by the number of shares to get book value per share. It roughly shows what owners would get if the company sold everything and paid all its debts, though real sales rarely match paper values.
Book value vs market value
Market value is what investors pay on the stock market. It is often far above book value, because the best assets, like brands, software and talented staff, barely show up on the balance sheet.
When book value matters most
For banks and insurers, whose assets are mostly money and loans. For them, the price-to-book ratio is a common way to judge value.
See it in real companies
Open a company to see what it sells and how it makes money.
Related terms
Price-to-bookPrice compared with what the company is worth on paper.
Balance sheetShows what a company owns and owes.
Assets and liabilitiesWhat a company owns versus what it owes.
GoodwillThe extra paid when buying a company above its book value.
Return on equityProfit made with the owners' money.
Market capWhat the whole company is worth on the market.