Asset Market Value versus Asset Book Value
Book value and market value are two ways to value an asset. An asset’s book value can differ from its market value. Market value is the value of an asset as currently priced in the marketplace. Book value refers to the value of an asset as reported on the company’s balance sheet. (However, some assets are reported at market value on the balance sheet.)
Book value is equal to the asset’s historical purchase price minus accumulated depreciation. Since book value is based on the asset’s actual purchase price it is considered more reliable but less relevant than market value.
Market value, also called fair market value, is equal to the asset’s current price or value in the open marketplace. Since market value is based on current market prices it is considered more relevant but less reliable than book value.
Asset Value for Company Valuations
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