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Posts Tagged ‘share’

We have been discussing bonds alot lately so let’s just take a break from bonds and discuss some stocks for a change. Today we are going to go back to basics abit. Let’s talk about what some of the terms on the financial statements or balance sheets mean. Let’s start with the Book value. Do you know what a book value is? Most people do but I’d like to just talk abit about it anyway.

Book Value explained

The book value is the difference between the company’s assets and liabilities. The company’s assets and liabilities are of course found in the balance sheets. If you are looking at a company’s financial highlights or balance sheet, you may see a line called ‘Book Value’. If not, you can simply calculate the book value yourself easily.

What does small or low book value mean?

A small or low book value means that the company’s profits will be limited. Basically, no matter how much assets the company has, its liabilities are as high which could be from too much debt. However, it can also mean that the assets of the company are undervalued and the actual value are not as low as estimated.

The book value is a good indication of how good a company is and whether you should invest in its stock.

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