Book Value of a Company
What Does Book Value of a Company Mean?
The book value of a company is the owners equity or shareholders equity, as shown on the balance sheet.
![bvc 1](https://seeaccountingnow.online/wp-content/uploads/2021/08/bvc-1.jpg)
How it Works
A business has assets—that is, things it owns and money that is owed to it.
![bvc 2](https://seeaccountingnow.online/wp-content/uploads/2021/08/bvc-2.jpg)
It also has liabilities—that is, what it owes to others.
![bvc 3](https://seeaccountingnow.online/wp-content/uploads/2021/08/bvc-3.jpg)
To wind a business up, it could turn its assets into cash by selling any buildings and equipment etc.
![bvc 4](https://seeaccountingnow.online/wp-content/uploads/2021/08/bvc-4.jpg)
It could also recoup any money owed to it by its customers.
![bvc 5](https://seeaccountingnow.online/wp-content/uploads/2021/08/bvc-5.jpg)
After this, it could pay its suppliers and also pay off any loans it has.
![bvc 6](https://seeaccountingnow.online/wp-content/uploads/2021/08/bvc-6.jpg)
Theoretically, the business could sell what it owns, get what it is owed, and take all the money out of the bank.
![bvc 7](https://seeaccountingnow.online/wp-content/uploads/2021/08/bvc-7-1.jpg)
It could then pay back what it owes lenders and creditors.
![bvc 7.1](https://seeaccountingnow.online/wp-content/uploads/2021/08/bvc-7.1.jpg)
After this, the money left owner goes to the owner
![bvc 7.2](https://seeaccountingnow.online/wp-content/uploads/2021/08/bvc-7.2.jpg)
This is the owners equity — or the book value of the company.
![bvc 8](https://seeaccountingnow.online/wp-content/uploads/2021/08/bvc-8.jpg)
Book value is not necessarily what the business would be worth if the business was actually wound up.
![bvc 9](https://seeaccountingnow.online/wp-content/uploads/2021/08/bvc-9.jpg)
It’s only a theoretical value used to help keep track of what the business owns versus what it owes.
![bvc 10](https://seeaccountingnow.online/wp-content/uploads/2021/08/bvc-10.jpg)