Book Value
Book Value is the value of an asset or security as entered in the company's books (financial statements). It represents the total value of the company's assets that shareholders would theoretically receive if a company were liquidated.
What does it tell you?
Book value is calculated by subtracting total liabilities from total assets. It is essentially the "net worth" of the company according to its accounting records.
Formula
Book Value = Total Assets - Total Liabilities
Limitations
The "real" market value of assets may differ from their "book" value (which is often based on historical cost). For example, real estate assets bought decades ago might be worth much more today than their book value. Conversely, intangible assets like brand value might not be fully reflected.
How to Use It
Note: Book value alone is hard to use for comparing companies.
Investors typically use the Book Value Per Share or P/B Ratio for better analysis.