Definition
Book value is the value of a company based on its financial records. It is calculated by subtracting total liabilities from total assets. It shows what the company would be worth if all its assets were sold and all debts were paid.
Example
Suppose a company has Rs 10 lakh in assets and Rs 4 lakh in liabilities, its book value is Rs 6 lakh. This represents the company’s net worth according to its books.
Caution
Book value is based on accounting data and may not reflect the current market value of a company. Some assets may be valued differently in real market conditions, so investors should not rely only on book value.