BOOK VALUE

Firms are required to record assets and liabilities in a balance sheet at the point they are acquired or taken on.

The sum of a firm’s “book” assets, net of outstanding liabilities, is known as its net asset value. This can also be referred to as the firm’s total book value. It won’t necessarily be the same as a firm’s market value because assets and liabilities recorded in the book are not always kept up to date and there are valuable assets, such as a firm’s brand value, that are not recorded at all. That’s why a firm may be said to be trading at a premium to its book (its market value is above its book value) or a discount (the opposite).