Investors and creditors have several measurements for determining the valuation of a company's stock and whether the stock is fairly valued, overvalued or undervalued. Creditors are interested in the company's asset value to determine how much to lend since assets are typically used as collateral for loans or determine a company's ability to pay back the loan.
Investors are concerned with a company's assets as they compare to its liabilities or book value, but also to the company's stock price or market value. Book value is the value of a company according to its balance sheet, or "books." Market value is the value of the company in the eyes of the stock market. These are two fundamentally different calculations that tell a story about the company's overall financial strength. In this article, we'll explore the differences between book value and market value and how they're used in analyzing stocks for investment.
Source : Investopedia
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