Book Value

what does it mean when a companies book value is declining over the years? I am still new to this and I am hoping that someone can answer the question.
I know it is bad but just how bad is it? I examined the intrinsic value of the company and it is undervalued right now which is good just need to be weary of that BV. Thank you

- Rookie
 

counter_violent

Legendary member
10,646 2,828
what does it mean when a companies book value is declining over the years? I am still new to this and I am hoping that someone can answer the question.
I know it is bad but just how bad is it? I examined the intrinsic value of the company and it is undervalued right now which is good just need to be weary of that BV. Thank you

- Rookie



Book value refers to the total amount a company would be worth if it liquidated its assets and paid back all its liabilities. Book value can also represent the value of a particular asset on the company's balance sheet after taking accumulated depreciation into account.


How it works/Example:


Book value is calculated by taking a company's physical assets (including land, buildings, computers, etc.) and subtracting out intangible assets (such as patents)and liabilities -- including preferred stock, debt, and accounts payable. The value left after this calculation represents what the company is intrinsically worth.

Thus, book value is calculated:

Book value = total assets - intangible assets - liabilities


Why it Matters:


Since book value represents the intrinsic net worth of a company, it is a helpful tool for invThe definition of book value on InvestingAnswersestors wanting to determine if a company is underpriced or overpriced, which could indicate a potential time to buy or sell. For instance, value investors search for companies trading for prices at or below book value (indicating a price-to-book ratio of less than 1.0), which implies the shares are selling for less than the company's actual worth.
 

Splitlink

Legendary member
10,850 1,233
I bought "The Zulu Principle" by Jim Slater in the early nineties. Easy for a layman to read, one of the shares it taught me to analyse correctly, for value and growth was Next PLC. I bought those shares for under 2 pounds. It lead me on to other successful purchases, often the object of takeovers, and is the most used textbook on my bookshelf. Time has passed and it is possible that other, better, books have been published since then., but I advise you to check it out.

Buying shares for investment by using fundametal analysis, as averse to trading, is the way to go for most people. It, certainly, has been for me-

Good luck with it.
 

robertd16

Newbie
3 0
Another way of looking at book value is if you acquired the company today, what tangible assets would you have, and what liabilities would you need to pay. It can be a useful tool for figuring out if a company is under/overpriced, but for firms with significant intangible assets (tech companies). The book value of an asset also may not be the best indicator for a REIT or similar real estate holding company because it may not give an accurate approximation of the market value of its assets.
 
thanks alot guys its good to have helpful people along the market. will definitely pay attention to that term. I have used it with the intrinsic calculator.(y)(y)
 
 
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