What is Book Value?
Nexa Consultancy | Startup & Finance Glossary
Book Value is the value of an asset as it appears on the company's balance sheet. For an asset, this is calculated as the original cost of the asset minus its accumulated depreciation. The book value of a company as a whole is its total assets minus its total liabilities, which is also equal to shareholders' equity.
For Startups: The book value of a high-growth tech startup is often much lower than its market value (or valuation). This is because a startup's most valuable assets, like its brand, intellectual property, and growth potential, are not fully captured on the balance sheet. Investors value startups based on future potential, not just their current book value.
Example: A company's balance sheet shows total assets of ₹1 Crore and total liabilities of ₹40 Lakhs. Its book value (or shareholders' equity) is ₹60 Lakhs.