BOOK VALUE
The current value of an asset. The book value of an
asset at any time is its cost minus its accumulated
depreciation. (Depreciation reflects the decrease in
the useful life of an asset due to use of the asset.)
Companies use book value to determine the point
at which they have recovered the cost of an asset.
The net asset value of a company’s SECURI-
TIES. This is calculated by subtracting from the
company’s total assets the following items: intan-
gible assets (such as goodwill), current liabilities,
and long-term liabilities and EQUITY issues. This
figure, divided by the total number of bonds or of
shares of stock, is the book value per bond or per
share of stock.
The calculation of book value is important
in determining the value of a company that is
being liquidated. For example, if a corporation
has 100,000 shares of stock issued and outstand-
ing and its assets total $5 million and its intangi-
ble assets and all liabilities total $1.6 million, its
net asset value is $3.4 million and its book value per share is $34.
