Glossary · Defined term
Book value
Book value is a company's net worth on its accounting records, and book value per share divides that by shares outstanding.
Last updated Oct 2, 2026
What it means
Book value is the value of a company's shareholders' equity as recorded on its balance sheet: assets minus liabilities. Book value per share divides that figure by the number of shares outstanding, giving an accounting-based value for each share. It answers the question of what shareholders would theoretically receive if every asset were sold at its recorded value and every debt paid off.
The price-to-book ratio compares the market price to this accounting value and is a classic yardstick for value investors. A stock trading below book value may be a bargain, or the market may be saying the recorded asset values are overstated. Accounting values can lag reality because balance sheets do not fully capture intangible assets like brand strength, customer relationships, or software.
Book value can even turn negative when liabilities exceed assets, which is common for companies that have borrowed heavily or bought back large amounts of stock. A negative book value does not automatically mean a company is worthless; it means the accounting measure has lost its usefulness as a valuation anchor.
An example
For illustration, a company has $4 billion of shareholders' equity and 1 billion shares outstanding, so book value per share is $4. If the stock trades at $12, the price-to-book ratio is 3, meaning investors pay three times the accounting value.
Related terms
Balance sheet, P/E ratio, Value stock, Market capitalization