Financial term · Reviewed August 17, 2026
Book value
Book value: The value of an asset in the accounts, generally cost less accumulated depreciation. It frequently differs from market value, and the gap matters when an asset is sold. It shapes how other figures are read instead of being a number a single calculator returns: in the business finance category, it bears most directly on tools like the Double Declining Balance Depreciation Calculator and the Sum-of-the-Years'-Digits Depreciation Calculator.
Book value is history, not an appraisal. It records what an asset cost less what has been depreciated against it, and depreciation schedules are chosen for accounting and tax reasons that have nothing to do with what a buyer would pay. A fully depreciated machine still running well has a book value near zero and a real market value that is not. The gap is where the tax consequence hides when the thing is finally sold.
| Term | Book value |
|---|---|
| Category | Business Finance |
| Type | Interpretive concept: read alongside a computed figure |
| Related terms | 8 defined in this glossary |
Before you rely on it
What to check
Establish the depreciation method before comparing two companies. Different methods produce different book values from identical economics.
The common error
Where people go wrong with book value
Using book value as a sale estimate. For anything you might actually sell, price it independently and treat the accounts as a separate question.
Worked through
Book value in plain numbers
A company buys a machine for $50,000 and expects it to last five years, depreciating $10,000 a year in a straight line. After three years, the balance sheet carries the machine at $50,000 minus $30,000, so its book value is $20,000; the machine might actually fetch $28,000 on the used market, or it might be worth $5,000 if the technology moved on. Book value is a record of cost less wear-and-tear allowances, not an appraisal. When the company sells at $28,000 it books an $8,000 gain over the carrying amount.
Easily confused
Book value and its neighbours
Book value is not market value, and it is not the same as net asset value or equity value. Market value is what buyers will pay now. Net asset value is common in funds and marks holdings to market. Equity value on the balance sheet, sometimes called book value of equity, is assets minus liabilities; some people also quote book value per share; the word book signals that accounting rules decide the number, so choices about depreciation methods and asset lives change it without any change in the real world.
In real decisions
Where book value turns up
Analysts compare share price with book value per share to judge whether a stock trades at a premium or discount to its accounting worth. Banks and insurers are often valued this way because their assets are mostly financial; lenders look at book value of collateral; owners use it to track tax depreciation and to calculate the gain or loss on a sale. A price-to-book ratio below one can point to a bargain or to a business whose assets are not worth their carrying amount.
Know the edges
Where book value stops being reliable
Book value can lag reality. Intangible assets like brands and software may not appear at all, while property bought long ago can be carried far below today's price. Different depreciation methods give different numbers for the same asset. For asset-light businesses, book value says little; it is most informative for capital-heavy companies with assets that hold their worth, and read it alongside earnings, cash flow and what the assets could realistically sell for.
Quick answers
What people ask about book value
Can book value be negative? Yes. When liabilities exceed assets, the equity on the balance sheet is negative. That can follow years of losses or large buybacks and dividends. It is a warning to look closer, though some healthy firms show it for accounting reasons.
Why do investors compare price to book value? It shows how the market values the company against its accounting net worth. A ratio near or below one can point to a cheap stock or to assets that are worth less than recorded. It works best for asset-heavy businesses.
Where this applies
How book value is used
No single tool computes this one. The idea shapes how other figures get read. The Double Declining Balance Depreciation Calculator is where it bears most directly, and the rest of the calculators below are where it also matters.
Definitions are checked against primary sources and carry a review date. They are educational reference, not financial, investment, tax or legal advice.
Related vocabulary
Terms used alongside this one
Keep reading
Nearby in the glossary
- ← Bond duration
- Break-even point →
- All 174 defined termsThe complete Free Calculators Online financial glossary.