Book value
Factual definition
Book value, in the book-equity sense, is recorded assets minus recorded liabilities. Individual assets also have carrying values.
Accounting book value can differ substantially from market value.
Book value at Hanil Widget Works
Fictional teaching case. Hanil Widget Works is an invented company used for this example.
Hanil’s book value is 32.1m of assets minus 18.5m of liabilities, for 13.6m of equity.
Scroll horizontally to read all columns.
| Assets | Liabilities and equity | ||
|---|---|---|---|
| Cash | 4.20m | Accounts payable | 6.10m |
| Accounts receivable | 7.90m | Accrued expenses | 1.70m |
| Inventory | 4.70m | Total current liabilities | 7.80m |
| Total current assets | 16.80m | Long-term debt | 10.00m |
| Property, plant and equipment | 2.30m | Other non-current liabilities | 0.70m |
| Land | 11.00m | Total liabilities | 18.50m |
| Deposits and other | 2.00m | Owners’ equity | 13.60m |
| Total assets | 32.10m | Total liabilities and equity | 32.10m |
Separate recorded equity from an offer price
Hypothetical company at 31 December 2025: recorded assets are US$50 million and liabilities are 30 million, leaving book equity of 20 million. With 2 million common shares and no preferred equity, book value per share is US$10.
A US$15 offer per share values the common equity at 30 million, or 1.5 times book. It does not imply that the accounting balance sheet should immediately be rewritten to the offer price.
To assess the premium, inspect asset composition and sustainable earnings rather than treating 1.5x as an answer by itself. The CFA discussion of book-value multiples explains why accounting measures and economic value can diverge.
A business with substantial assets acquired long ago is not directly comparable with one whose internally developed capabilities are largely absent from recorded assets.
Where Book value fits
Explore this term in the glossary cloud →