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Book Value Of Investment

The book value of an investment generally refers to the price that an investor pays for it. This price an investor pays for the investment is based on how it was listed by the seller, thus the name of book value. For investors, the book value of investments is important to take into consideration in order to make good decisions. Investors purchase an investment, such as a debt or security, at the book value, and then sell it at a selling price. However, at the day's end, the factor a investor pays most attention to is their gain, called a capital gain. This gain in capital is the difference in prices of selling price and book value, given by the equation of selling price - book value. So before a stock has been sold, investors will compare amount of their book value with that of their selling price to assess their investment.

Fast Facts

  • the term book value is also used in reference to the value of a company's assets

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