Book Value Of Equity

Book value of equity is an important concept because it helps in the interpretation of the financial health of a company or firm as it is the fair value of the residual assets after all the liabilities are paid off.

Book value of equity. The book value of equity is based on stockholders equity which is a line item on the company s balance sheet. Book value of equity per share effectively indicates a firm s net asset value total assets total liabilities on a per share basis. The book value of equity is equal to total assetsminus total liabilities preferred stocks and intangible assets.

In other words as suggested by the term itself it is that value of asset which reflects in the balance sheet of a company or books of a company. Book value of equity also known as shareholder s equity is a firm s common equity that represents the amount available for distribution to shareholders. This article has been a guide to what is book.

From the perspective of an analyst or investor it is all the better if the balance sheet of the company is marked to market i e it captures the most current market value of the assets and the liabilities. When a stock is undervalued it will have a higher book value.