Book value equals market value

Definition: Book value reflects historical cost less depreciation/impairment; market value reflects current expectations of future cash flows. For most compani…

Reality

Book value reflects historical cost less depreciation/impairment; market value reflects current expectations of future cash flows. For most companies — especially those with significant intangibles, brand value, or growth potential — market value exceeds book value substantially.

Why It MattersUnderstanding why "book value equals market value" is a misconception helps avoid analytical errors and improper financial decision-making.
CategoryValuation

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