Book value and market value are two fundamental concepts used to evaluate the worth of a company, but they differ significantly in meaning and application. Book value refers to the net value of a company’s assets as recorded on its balance sheet, essentially calculated as total assets minus total liabilities. It represents the accounting value of the company and is often considered the company’s intrinsic worth based on historical cost. In contrast, market value is the current price at which a company’s shares are trading on the stock market, multiplied by its total outstanding shares — commonly referred to as market capitalization. While book value is static and based on past data, market value is dynamic and reflects investor sentiment, future growth prospects, and market conditions. Discrepancies between the two can signal whether a stock is undervalued or overvalued, aiding investors in making informed decisions.

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