What does book value refer to in accounting terms?

In accounting, book value refers to the historical cost of assets, liabilities, and equity as recorded on a company's balance sheet. This value is based on the original purchase price of an asset, minus any accumulated depreciation, amortization, or impairment costs. It represents the value that has been recognized in the company's financial statements, reflecting what the company has invested in its assets and how much it owes to creditors.

Book value is an important metric as it provides insight into the financial health of a company from an accounting perspective. It allows for comparisons between the company's book value and its market value, which can indicate whether a stock is undervalued or overvalued based on current trading prices. Additionally, understanding book value is essential for assessing the company's asset management and overall performance.

In contrast, current market price of assets reflects the price at which assets could currently be sold, which may differ from their book value. Future projected revenue is concerned with earnings expectations and does not directly relate to asset values. Estimated liquidation value pertains to the amount a company might fetch by selling its assets in a liquidation scenario, which is not the same as the historical cost that book value represents.