What does Book Value represent?

Book Value represents the difference between the cost of a depreciable asset and its related accumulated depreciation. This definition highlights that book value is essentially the net value of an asset as recorded on the balance sheet after accounting for depreciation. When an asset is purchased, it is recorded at its original cost. Over time, as the asset is used, it is expensed through depreciation, which reduces its recorded value. The book value reflects the remaining undepreciated amount of the asset, representing the value that is still considered useful or economically viable for the company.

Understanding book value is critical for financial analysis, as it provides insight into how much of an asset's value remains on the books and can assist in evaluating the company's financial health and resource management. It is a fundamental concept that relates closely to asset management and financial reporting, distinguishing itself from other figures like market price, which reflects current market conditions and not the company's recorded value.