Glossary
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Net Book Value
« Back to Glossary IndexIn the context of business valuations, the “net book value” (NBV) refers to the net amount at which an asset or group of assets is reported on the company’s balance sheet. It is calculated by subtracting the accumulated depreciation or amortization from the original cost or purchase price of the asset. Net book value represents the carrying amount of the asset on the financial statements. The formula for calculating the net book value is as follows: Net Book Value (NBV)=Original Cost?Accumulated Depreciation. Net book value is a key metric in business valuations because it reflects the remaining value of an asset on the company’s books. When valuing a business or its assets, analysts may use the net book value as a starting point for certain valuation methods, such as the asset-based approach. It’s important to note that while the net book value is useful for financial reporting purposes, it may not always reflect the fair market value or the economic value of an asset. In certain cases, assets may be worth more or less than their net book value, and additional valuation methods or adjustments may be necessary for a more accurate representation of the company’s value.
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