Difference between book value and market value.

The major differences between book value and market value are as follows −

Book value

• Real value of an asset.

• Reflects firm’s equity.

• Not related to financial market.

• Depreciation is taken into account.

• Book value = (assets – liabilities)/ number of outstanding shares.

• Book value = cost of asset – (depreciation + amortization).

• Frequency of fluctuations happens at periodic intervals.

• Accounted in balance sheet based on historical cost, amortized value or fair value.

Market value

• Maximum value of an asset/security which can be bought/sold in the market.

• Reflects current market price.

• Market value is dependent on financial market.

• In most cases, depreciation is not accountable.

• Market value = market price per share * number of outstanding shares.

• Frequency of fluctuations is very frequent.

• Fair value/market value of an asset.