Book value is a loosely used generic term referring to the accounting value of a business or operation. It is generally referred to as the net balance sheet value on a given date. This means assets less liabilities and less intangibles. Other variations of book value include carrying value, basis, and tangible book value.
There are several business financial attributes required for EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) to work well as a basis for the multiple of earnings method (the method used with the Market Comparable Valuation Approach); see Fair Market Value for a better understanding of the three primary business valuation approaches.
There are several definitions associated with the term ‘Book Value’ and depending on the context of its use, determines the correct definition and proper use.
