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

Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Home | 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