Book Value Vs Net Book Value

241 billion in assets less 168 billion in liabilities equals 72 billion in owners equity.

Book value vs net book value. What is net book value. In the case of microsoft for example the company s book value on june 30th 2017 was 72 billion. Companies without a lot of nta tend to trade at multiples of their p b.

Book value per common share also known as book value per equity of share or bvps is used to evaluate the stock price of an individual company whereas net asset value or nav is used as a. Net book value nbv refers to a company s assets or how the assets are recorded by the accountant. The p b is the share price of a company divided by its nta per share or book value per share.

Fair market value should reflect the current price of the asset based on its condition which is often estimated as the replacement cost of the asset. Net book value is the amount at which an organization records an asset in its accounting records net book value is calculated as the original cost of an asset minus any accumulated depreciation accumulated depletion accumulated amortization and accumulated impairment. Net book value 1 the cost of an asset the amount that was paid for it minus accumulated depreciation for financial reporting purposes fair value asc 805 2 the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between marketplace participants at the measurement date.

For example a company purchased a computer for 900 in year one and expects the computer to have a usef. If the ratio is less than 1 the stock is trading at a discount to its book value. Net book value formula for depreciation.

Book value is the net value of a firm s assets found on its balance sheet and it is roughly equal to the total amount all shareholders would get if they liquidated the company. Net book value is based on depreciation which is an estimate based on the asset s estimated useful life and salvage value. Ask an expert about net book value what is the net book value formula for depreciation.

Net book value of machinery or equipment can also be impaired by damage or obsolescence. If the ratio is greater than 1 the stock is trading at a premium to its book value. Nbv is calculated using the asset s original cost how much it cost to acquire the asset with the depreciation depletion or amortization of the asset being subtracted from the asset s original cost.