Wall Street Words word of the day = Book Value

Hello YouTube, Todd Ault here, and Welcome to Wall Street Words! Today's Wall Street term is "Book Value"

With "Book Value" you take the equity and you divide that by the number of shares to come up with a "per-share" book value. Now, the book value is an important determination to figure out what the actual company is worth on its books. But I'm going to walk you through why book value doesn't always work. When you buy something "below book," let's say the book value's eight dollars and the stock's trading for four it's fifty-percent below book, however, a famous book value issue - so in the late 1990s, early 2000s, Playboy, the magazine, Hugh Hefner's magazine, was publicly traded. But Hugh Hefner owned a mansion and that was controlled by Playboy, the public company. And in that mansion, he had lots of paintings that he had bought years earlier, and those paintings appreciated in value. But on his books, he had it at the purchase price. So the book value was misleading.

Those paintings were worth a lot more money than was on "the books" of the company and investigative people, people who liked to make investments and they do deep research figured out that Playboy was worth a lot more money than it was on the books. Hey, if you like a company and you're thinking of buying a company below book or at book, do some digging and find out if those assets are carried at their original value when they were bought. Hey as a side note. I've used book value to make investments and it's made me a lot of money. A lot of times when I find something very much under book, there's a reason for that. And you've got to investigate to find out why.

Definition - Book value is equal to the cost of carrying an asset on a company's balance sheet, and firms calculate it netting the asset against its accumulated depreciation. As a result, book value can also be thought
of as the net asset value (NAV) of a company, calculated as its total
assets minus intangible assets (patents, goodwill) and liabilities. For
the initial outlay of an investment, book value may be net or gross of
expenses such as trading costs, sales taxes, service charges, and so
on. The formula for calculating book value per share is the total
common stockholders' equity less the preferred stock, divided by the
number of common shares of the company. Book value may also be
known as "net book value" and, in the U.K., "net asset value of a
firm."

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