SHARETIPSINFO >> Articles Directory >>Book value is the measure to value your assets and Bottom line is the net balance

Book value – value your asset

When an asset is acquired for the first time, the cash value at the time of acquisition is its book value. Generally, the acquisition cost of the buildings and properties like land is the price spent at the time of purchase. This carries the actual price minus the expense encountered in the possession of the property. This book value comes under the asset book value of the commodity.

The book value indicates the amount that will be left behind in a case when the company decides to withdraw abruptly. Companies are intended to grow in a rapid pace. So the book value will be always lower than the market capitalization. When the company is not growing fast as expected, book value can be used to evaluate the company’s performance. That means book value is a term of higher interest to the investors as compared to growing companies.

The book value as it appears in the balance sheet will be adjusted to the market value. This creates a term known as adjusted book value. The value as per the actual rate of an entity is referred to as intrinsic value and indicates the opposite of book value. The book value is used to calculate the price to book ratio of the company. This is used to evaluate the value of the company in the actual market.

Book value is other wise known as net assets value. This is because it is calculated as the net gross expenses of the company. At the point when the company is liquidated, this value will be given away to the shareholders. This indicates the part of asset that is being given to the shareholders.

Book value can be compared to the company’s market value. This will give an idea whether the stock is under or over than the actual price. The price paid for a security in an investment indicates the book value. There the selling price minus the book value gives the loss from that investment.

Bottom line – the net balance:

In a company atmosphere, the term Bottom line has high importance. This is a term that has high relevance in the balance sheet of any company. Bottom line means the benefits after all expenses by the company is met. Thus can include the total expenses incurred in taxes also. Hence, bottom line is an indicator of the company’s financial status.

Bottom line is calculated by deducting the total expenses from the company’s gross sales. The taxes and expenses are thus included in this reduction. Hence, investor’s can use this bottom line as a value that can be used to know the financial condition of the company at that time. This shows whether the company is running successfully or is red marked in the market.

Bottom line is a reference on the company’s performance. therefore, when a low value is seen in the bottom line, a fall in profit is indicated. Steps can be taken by the company to increase the profit. The step towards this can be taken by the company or investors.

To increase the bottom line, there are different steps, which are taken by the company. The bottom line is obtained after reducing the expenses. Hence, a step to reduce the total expenses will be a better step. Reducing unnecessary expenses is a major step that is to be taken at the time of budget of the company. The company can reduce the total number of posts. They can combine the responsibilities from many individuals to reduce the number of employees. They can reduce the overtime taken in the company. Another effective step is by turning full time to part time so that the expenses in that area can be reduced.

Another major step that can be taken to increase the bottom line is by increasing the revenue. The sources of revenue can be obtained by launching a new product or service. They can even try to get a new market where they can flourish. When they are increasing the revenue, they can try to reduce the expenses as much as possible. Once the concentration is on these factors, the company can increase the bottom line and keep the expenses at the lowest.

The steps to increase the bottom line are usually taken by the management of the company. When the investors find that the company is in a red status, they can prepare themselves to face the situation. They can try to act accordingly with their investments so that the ultimate result is making profit. Bottom line is usually included in the company's income statement. It finds a position in the last line and often then they are referred to as net income.


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