What does the term 'Book Value' refer to?

The term 'Book Value' refers specifically to the value of an asset as it is recorded in a company's financial statements or accounting records. This value is derived from the original cost of the asset minus any accumulated depreciation or impairment costs that may have been recognized over time. In accounting terms, it represents the net asset value that is shown on the balance sheet.

Book value is an important concept because it provides insight into the value of a company's assets from an accounting perspective, which may differ from market value due to market fluctuations or changes in investor sentiment. Understanding book value helps stakeholders evaluate the worth of a company’s tangible assets and assess how they are valued on the books compared to their market performance.