Investor Glossary-net book valueInvestor Glossary-net book valueInvestor Glossary-net book valueInvestor Glossary-net book valueInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Net Book Value

The HTML to link to this page
 

Net book value is the value of an asset on the books of the company. For example, suppose a company buys a machine with a five-year useful life for $5,000 cash. It debits Fixed Assets $5,000 and credits Cash $5,000. The machine's net book value is currently $5,000. After one year, the company records depreciation by debiting Deprecation Expense $1,000 ($5,000/5) and crediting Accumulated Depreciation for $1,000. The machine's net book value is now the original cost ($5,000) less the accumulated depreciation ($1,000), or $4,000. The problem with net book value is whether it reflects economic reality or merely accounting convention. The net book value of $4,000 probably isn't what the machine would fetch at public auction. Further, the net book value calculation itself is an estimate, because the machine's exact useful life is unknowable. Nevertheless, net book value does give financial statement readers a rough idea of asset values. Note that net book value is similarly used to value long-term liabilities which are amortized, such as bonds. Finally, net book value is often simply expressed as the book value.



Rate this net book value definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: 1035 exchange, phantom income, command economy, diluted share, LIBOR, per diem, ex-dividend date, debt service coverage, cancelled check, Zero Cost Collar, dividends payable, implied volatility, 1031 exchange, labor relations, 144a, covered put, irrevocable trust, class C shares, quality assurance, liquidity ratio, annual return, deferred tax, margin rate, reverse mortgage, deferred revenue, inflation, stock market close, limit order, retained earnings, VIX, current ratio, FTSE, Key Rate Duration, balance sheet, APR, required rate of return, stock split, FICO score, 401a, minority interest, open position, real GDP, option premium, wholly-owned subsidiary, risk management, ex-dividend, in escrow, average price per share, EBITDA


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Investor Glossary | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use