The book value

Q: What’s a company’s book value?

A: Book value is an accounting measure that investors sometimes look at to get an idea of a company’s intrinsic value. Book value is simply the company’s total assets, less its total liabilities. It’s showing you what shareholders would own once debts and liabilities are covered. Book value’s usefulness has shrunk somewhat as our economy has evolved. It worked well when most businesses were simpler and capitalintensive, with assets such as factories, equipment and land appearing on the balance sheet. It works less well today, though, as there are gobs of serviceoriented companies and high-tech companies that are heavy on intangible assets, such as patents and goodwill (an accounting measure often tied to acquisitions). Consider Facebook, with many assets that don’t register significantly on the balance sheet: intellectual property, employees, a strong brand and a massive worldwide network of customers. As of the end of 2019, its total assets were $133.4 billion and its total liabilities $32.3 billion, leaving a book value of $101.1 billion. That’s far less than its recent market value of roughly $540 billion. With many companies, your best bet is to ignore book value.

one of the world’s first industrial research and development facilities; here, products such as nylon, Lycra, Kevlar and Tyvek were conceived, along with neoprene — the first synthetic rubber. Today, my market value is over $30 billion, and my brands include Corian and Styrofoam. I completed a merger with Dow Chemical in 2017 and then spun it off in 2019. Who am I?

Colgate-Palmolive