Book Value Vs Market Value Of Assets
Which is more important to the decision making process.
Book value vs market value of assets. In those cases the market sees no reason to value a company differently from its assets. Market value is the price at which the assets liabilities or equity can actually be bought or sold. Book value is the net assets value of the company and is calculated as the sum of total assets minus the amount of intangible assets and is always equal to the carrying value of assets on the balance sheet while market value as the name suggests that the value of the assets that we will receive if we plan to sell it today.
Book value is the actual worth of an asset of the company whereas market value is just a projected value of the firm s or asset s worth in the market. Market value and book value are often very different. On the other hand book value is a concept related to the value of an asset as recognized by a company on its balance sheet balance sheet the balance sheet is one of the three fundamental financial statements.
The book value of an asset is its original purchase cost adjusted for any subsequent changes such as for impairment or depreciation. However some assets are reported at market value on the balance sheet. The value of assets or securities as indicated by the books of the firm is known as book value.
Essentially the market value of an asset is a quantified reflection of the perception of the value of the asset by the market. Book value equals market value. An asset s book value can differ from its market value.
Sometimes book valuation and market value are nearly equal to each other. Book value is the recorded price of an asset which is shown in the balance sheet excluding depreciation. Market value is that current value of the firm or any asset in the market on which it can be sold.
Ease of determination of value. Book value is equal to the asset s historical purchase price minus accumulated depreciation. Book value per common share also known as book value per equity of share or bvps is used to evaluate the stock price of an individual company whereas net asset value or nav is used as a.