From the course: Financial Accounting Part 1
Join today to access over 24,100 courses taught by industry experts.
Book value vs. net worth
From the course: Financial Accounting Part 1
Book value vs. net worth
- Although the balance sheet is useful in showing the financial status of a company, it does have limitations. Primarily, it does not reflect the current value or worth of a company. What the balance sheet reflects is the value of a company's net assets, assets less liabilities that are recorded on the books or in other words, the company's book value. Reorganizing the accounting equation results in the following, assets minus liabilities equals owner's equity and owner's equity is the owner's residual interest in the company as per the books or the book value of the owner's interest. Now, if the balance sheet were perfect, meaning that it included all economic assets reported at their current market values, then the amount of owner's equity would be equal to the market value of the company. Another way to say that is if the balance sheet were perfect, the book value of a company would equal its market value. In the…
Practice while you learn with exercise files
Download the files the instructor uses to teach the course. Follow along and learn by watching, listening and practicing.
Download courses and learn on the go
Watch courses on your mobile device without an internet connection. Download courses using your iOS or Android LinkedIn Learning app.