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Thank God we are spelt different.
JHTW
now while I am at it:
Bill Bray wrote:
The term 'book value' has only one understood meaning and that is the
value
of itemised assets of an entity depreciated by specifically
allowed
percentages as determined by IRD. Forget the rest of the
explanation.
BB
That's if you work for the IRD - Bill
!
And then you would be off the mark because you have
just described the "Taxable Value" of an asset.
Which may or may not be the same as the "Book
Value" depending on the Accounting Policies of the Entity.
Go back to my original posting and
re-read.
----- Original Message -----
Sent: Friday, June 20, 2003 7:57 AM
Subject: [sharechat] Re: book value
My god.............Johnny Wilkinson on sharechat!
John
H T Wilkinson writes:
> Gav - The definition you offer for "Book
Value", in your Basic Summary, is what is known as the "Net Realisable Value".
>
> "Book Value" is the figure that an asset is recorded at in
an entity's financial records.
>
> In the case of a depreciable
asset, e.g. a Motor Car, it will be it's original cost less accumulated
depreciation.
> Original Cost will exclude GST if the entity is GST
Registered and it's Accounting Policy is to prepare Financial Statements on a
GST exclusive basis (which most do).
> "Depreciation" is an amount
claimed against revenue so as to spread the cost of a depreciable asset over
its useful life.
> The amount claimed for Depreciation may or may not
result in a "Book Value" that exactly reflects the 'Net Market Value" of an
Asset.
> Financial Statements for "Normal" reporting purposes are
prepared on a going Concern Basis using the Book Value of depreciated assets.
>
> In the case of non-depreciable assets, e.g. Debtors,
Inventory, the valuation of those assets will be considered at balance date
and any write downs, but not write ups, deemed prudent will be made to reduce
their book values.
>
> So - Book Value = What's in the Books,
and not necessarily Market Value
>
> Market Value is another
exercise and is what those "Due Diligence" guys get up to.
>
> JHTW
> ----- Original Message -----
> From: Gavin Treadgold
> To: sharechat@sharechat.co.nz
> Sent: Thursday, June 19, 2003 3:42 PM
>
Subject: RE: [sharechat] book value
>
>
> Hi
All.
>
> > -----Original
Message-----
> > Book value is the the accounting value
of assets. For example you buy a
> > nice Mercedes,
you have an asset. But the book value of the
> >
asset decreases over time as deprecation sets in.
>
> This is true for the book value of an individual asset,
but from an
> investment perspective I believe that to
calculate the total book value of a
> company you must
offset any liabilities against the assets to generate the
>
book value. Perhaps a good indicator of the book value of a company is
how
> much cash would be generated if the whole company was
liquidated and sold.
> Before distributing the cash, all the
debts must be paid off and then the
> remainder is paid out
- this final amount for payment is what I would call
> the
book value.
>
> Book value is pretty much a snapshot
of the current point in time, it does
> not take into
account future earnings.
>
> Market capitalisation,
the markets value of the company, on the other hand
> is a
speculative value of the current book value _plus_ future
earning
> potential. If a company is expected to generate
good growth (and hence
> earnings) in the future, then
investors are prepared to pay a premium for
> the future
earnings and the market cap will be greater than the book
value
> of the company. As market cap is number of shares *
share price, the Price
> to Earnings ratio (P/E) is one
indicator of the current premium that the
> market has on
future earnings for the company. The higher the P/E, the
more
> growth in earnings is expected by the market and the
higher premium an
> investor will pay for partial ownership
of the company.
>
> I guess a basic summary is:
-
> * book value is how much cash would be generated
if all the assets were
> sold for a fair price and
outstanding debts being paid off
> * market value is
the markets current valuation of the business, which
>
incorporates both book value, and speculation on future earning potential.
>
> Hope this helps!
>
>
Cheers Gav
>
>
>
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