Book Value and Intrinsic Value

Book value refers to the total value of the assets which is less the value of the total liabilities. The book value useful in measuring the value of a firm asset which has accumulated until the present time. Theoretically, the book value is to determine the amount to be received by shareholders of a firm in case the firm becomes liquidated.  For instance, a firm may have $23 million assets and $ 20 million liabilities; this implies that the book value of this firm will be # million.  Liquidation value refers to the prices of substantial tangible assets when the firm plans to go out of the business and also needs to liquidate the assets within a limited period.  Thus, the liquidation value is far much less than the market value thus exposing the investors to the open market. When calculating the liquidation value, intangible assets such as goodwill and reputations are not included (Shleifer & Vishny, 2003).  The market

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