Difference between Book Value and Market Value

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Permalink Reply by ahmed badr ahmed on March 13, 2010 at 2:47am

the book value is price of the object when it was bought, so it refers to acertain moment and date rcorded in books of acompany, where as the market value is price of the object now in the market. Example: if you bought 100 stocks of acompany last year at price of 10 dollar for each stock then the value of the stocks is $1,000, after ayear this is called book value.On the other hand if you sold these stocks to day at price of 15 dollar for each, then the market value is $1,500

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Permalink Reply by suneV on March 13, 2010 at 3:30pm

Totally understand thanks for replying!

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Permalink Reply by Emily Abudu on March 13, 2010 at 4:56am

In addition the book value is the value of the furniture recorded in your balance sheet. ie the historic cost of the furniture ( amount you bought the furniture) less any depreciation you have charged for that furniture.
e.g in 2007 you bought furniture worth £1000, and every year you charge depreciation of £100. the book value at the end of 2009 ( 2 years later) will be £1000 - £200 ( total depreciation) =£800.

The market value is how much you will have to pay today to purchase the same furniture. e.g Now you want to buy the same type of furniture as the one you bought in 2006 and it is going for £1100 in the stores. the current market value will be £1100.
hope this helps.

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Permalink Reply by suneV on March 13, 2010 at 3:30pm

Awesome explanation, thanks a lot Emily!

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Permalink Reply by Pat Wildenburg on March 13, 2010 at 9:21am

Another way to look at this is that market value is replacement value for your current assets. Book is original cost and/or asset value shown on your books. Cheers

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Permalink Reply by suneV on March 13, 2010 at 3:31pm

Thanks for your help Pat!

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