Fundamentals: Understanding Book Value
Reviewing an unusual metric that is often meaningless, yet sometimes important
Book value, also known as shareholders’ equity, is an odd concept because quite often, it doesn’t matter at all.
One of the themes we’ve hit on multiple times in this series is the idea that accounting is as much an art as a science, as we discussed in our comparison of earnings and cash flow. Similar to earnings, book value is not necessarily a perfect…