Forum Archive Index - June 2003

["Dick O'Connor" <callme_nz@hotmail.com>]

Book value is an American term equivalent to what used to be referred to 
here as net tangible assets, and the more common term these days is equity 
or sharehlders' equity.

It is the sum total of money contributed to a company by shareholders....the 
initial money put in to start a company, and any subsequent money raised 
through issuing new shares and also retained profits (which also, of course, 
is shareholder money).

The value of book value in the past was that a steel mill, say, with the 
highest book value had had the most equity put into it and thus owned the 
biggest factory so that it had the scope to make the biggest profits when 
things were going right. Today, the smokestack indistries of less important 
and earning power is often more important than hard assets.

Apart from equity, a company's total funds will likely also include 
borrowings.

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