Book Value Vs Market Value Accounting
Book value is the actual worth of an asset of the company whereas market value is just a projected value of the firm s or asset s worth in the market.
Book value vs market value accounting. The book value of an asset is its original purchase cost adjusted for any subsequent changes such as for impairment or depreciation. Market value is higher than book value. On the other hand book value is a concept related to the value of an asset as recognized by a company on its balance sheet.
Book value is equal to the value of the firm s equity. The market value is the value of a company according to the markets based on the current stock price and the number of outstanding shares. When the market value is less than book value the market.
For example a company has a p b of. For example you bought a machine for 7 000 and recorded 1 500 for depreciation. Book value gives us the actual worth of the assets owned by the company whereas market value is the projected value of the firms or the assets worth in the market.
The amount of money you put into your company may outweigh its worth in the current market. In many cases the carrying value of an asset and its market value will differ greatly. Some assets might have a higher market value than book value meaning it would sell for more than what you paid for it minus depreciation.
The price to book p b ratio is a popular way to compare market value and book value. Market value is the price that could be obtained by selling an asset on a competitive open market. It is equal to the price per share divided by the book value per share.
Book value is equal to the value of the firm s equity while market value indicates the current market value of any firm or any asset. Whereas market value is the price lower or higher than the book value which can be obtained in case of selling of that assets class or it is the price which is offered by a customer during the sale of the assets. Market value is the price currently paid or offered for an asset in the marketplace.