Brief Definition
The Adjusted Book Value Method is a way to determine the value of a company by adjusting its recorded book value to reflect the fair market value of its assets and liabilities. It involves making adjustments to account for factors that affect the value of the company’s assets, such as changes in market conditions or the value of intangible assets. This method is used when the recorded book value does not accurately represent the true value of the company’s assets.
Further Explanation
The Adjusted Book Value Method is a valuation approach used to determine the value of a company based on its adjusted book value. It involves calculating the net value of a company’s assets by subtracting its liabilities from its total assets, similar to the traditional book value. However, in the adjusted book value method, certain adjustments are made to reflect the fair market value of the company’s assets and liabilities. These adjustments account for factors such as changes in market conditions, inflation, or the value of intangible assets not reflected in the book value. The adjusted book value method is commonly used when the fair market value of a company’s assets differs significantly from their recorded book value.