1: book value definition
2: how book value works
3: book value vs equity
4: example of book value
Opening information:
Book value statement breaks into two words book and value. The book means a consistent page of together materials with a cover.
Value means the actual worth of some matter. Book value means the total worth of the whole Material of consistent pages.
In business terms, the book value means the total whole money value of the industry or company.
So this article contains information about what is book value, how book value works in the stock market for corporate business, and what is the difference between book value and equity, finally one example about book value.
1: book value definition
One of the businesses named Matko is a selling shop. This cat shop is all over the country in 45 locations and made a greater amount of profits for doing this business.
They sell different kinds of cats, from very cheap to highly valuable perceived cats in the market. This business runs in Singapore and Spain, where people’s very likely to love to buy and nurture cats in their homes.
Moreover, Matko purchased more materials to expand the business, where they grew their business by 25 percent over the past 5 years.
Instead of growing the matko, if they decide to close the business, how much do they have now on hand? They had total assets of materials for feeding food for the cats, cat homes, building to nurture more cats, their multiple branches building location, and finally their business logo value. which is all worth 150 million dollars.
On the other hand, by selling all these assets and paying all the liabilities which are bank loans, loan interest, another bond kind of interest, accounts payable, long-term debt of loans extra…. which total liabilities are worth 113 million dollars.
By closing the business by selling all assets and paying all liabilities, they would end with 37 million dollars on hand.
But wait this total amount of 37 million dollars is not for one person, Matko had 500 shareholders as a partner for his business with 50,000 shares outstanding.
So if the Matko dividend the 37 million dollars for 50,000 shares, each share owns $740, which means 500 shareholders’ of the Marko receive the $740 for each share based on the shares they are holding in the Marko business.
Here the $740 for each share after selling all the assets and paying all the liabilities of the business is called the book value of the company Marko.
Without a business, assets, and liabilities there is no book value in the business terms. So let’s dive to know how the book value works in the stock market.
2: how book value works
Book values are the which are tracked and recorded by Investors before Investing in any business.
No matter what, if the business is doing rocket science or selling popcorn, when there is no book value after selling the asset and payment of liabilities, the certain kinda business has no value.
That’s why most of the best Investors in the world would always give importance to the book value of the company by focusing less on the industry’s net income.
When one business has big book value growth consistently over time, the business is showing a strong positive sign of moat.
After calculating the book value we find in the above Marko business. The stock Investor checks the stock price to pay by best low price for getting a high book value amount.
Most people’s confused about the book value and equity of the company. So let’s jump into the key difference in it.
3: book value vs equity
The difference between the book value and equity value is, that book value means the share value of the equity.
Equity means a total amount of book shares value, which means after payment of liabilities using assets the remaining total amount without dividing as a share is called equity in business terms.
Moreover, Investors are also confused about business equity and market equity, so let’s see the difference between them now.
4: business equity vs market equity
In the market, equity means calculations of the current shares price of stock multiplied by the total outstanding shares of the business.
Business equities which are the real value of the company are normally mentioned on the balance sheet of the company after the subtraction of assets from liabilities.
So Normally stock Investors perceive the market equity as a market cap of the company. Which is also called as market capital of the company.
On the other hand, some say these words as market capitalization or enterprise value but they are all the same things.
Market rule: #100141
Book value is considered as equity which is reported in the balance sheet of the company in the manner of equity as book value. So the book values came in the market rule anyway. But making any investment decisions completely based on the book value is completely responsible from your side.
If your investor and not comply or align investing based on market rules please learn about how to regulate your investments under your control with the use of Rule investing.