Question

What is book value? Can someone explain this concept with EASY English?

Answer 1

BOOK VALUE

Total value of business's assets found on the business's balance sheet is called book value. Book value represents the value of all assets if these assets liquidated.

Book value actually means the value of business according to its books or accounts.

In some cases it is also refer book value of asset here book value means cost of asset after deducting the depreciation. For example if the value of any asset is $100000 and depreciation on the asset is $30000. In this case, book value of that asset is $70000 ($100000 - $30000)

So book value is the amount that company's creditors and investors can expect to receive if company is liquidated.

Book value is calculated on the basis of total assest minus total liabilities. If total liabilities is deducted from total assets then the difference will be called book value.

Assets include fixed and current assets and liabilities include current and non current liabilities.

But in some case intangible assets are not included in assets while evaluating the book value. The reason is that the value of intangible asset cannot be realised during the liquidation of business.

So from above, we conclude that book value is that value that are shown in company's balance sheet.