Warren Buffett pointed out the difference between book value and intrinsic value.
"Book value is what the owners put into the business, intrinsic value is what they take out of it."
In another explanation offered in a 1996 Berkshire Hathaway annual report, he likened book value to college tuition paid, with intrinsic value being the income resulting from the education. The education and the dollars spent on an education mean nothing unless there is a resulting financial return.
The point: It's easy for investors to put too much emphasis on book value and not enough on intrinsic value.
Keep INVESTING Simple and Safe (KISS) ****Investment Philosophy, Strategy and various Valuation Methods**** The same forces that bring risk into investing in the stock market also make possible the large gains many investors enjoy. It’s true that the fluctuations in the market make for losses as well as gains but if you have a proven strategy and stick with it over the long term you will be a winner!****Warren Buffett: Rule No. 1 - Never lose money. Rule No. 2 - Never forget Rule No. 1.
Showing posts with label Book value. Show all posts
Showing posts with label Book value. Show all posts
Friday 24 April 2009
Saturday 25 October 2008
Book Value (Net Asset Value)
Synonyms:
Net asset value
Book value
Balance sheet value
Tangible-asset value
Net worth
= Total value of a company's physical and financial assets minus all its liabilities.
It can be calculated using the balance sheets in a company's annual and quarterly reprots.
From total shareholders' equity, subtract all "soft" assets such as goodwill, trademarks, and other intangibles.
Divide by the fully diluted number of shares outstanding to arrive at book value per share.
Net asset value
Book value
Balance sheet value
Tangible-asset value
Net worth
= Total value of a company's physical and financial assets minus all its liabilities.
It can be calculated using the balance sheets in a company's annual and quarterly reprots.
From total shareholders' equity, subtract all "soft" assets such as goodwill, trademarks, and other intangibles.
Divide by the fully diluted number of shares outstanding to arrive at book value per share.
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