Analysis on Financial Statement (book value)
#1
hello po. I would just like to ask how a company's book value increases. There was this financial statement of a certain company where the book value increases every year, but the amount of increase is greater than its earnings. I learned from somewhere that a portion of company's earnings will be given as dividend to share holders and the rest is retained, some of which will translate to an increase in bookvalue. Therefore, the increase of bookvalue cannot be greater than the earnings. Please correct me guys if i am mistaken. thanks
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#2
Book value is the assets, I believe. Stuff like machinery, stocks, real estate, etc.

A possible example is a manufacturing firm that sells products but owns real estate (maybe for factories, etc.). Their manufacturing earnings are P1 million, but then their real estate worth P10 million doubled in price for some reason so book value increases by another P10million. Then their machinery worth P5 million got upgraded and is now worth P10 million so that's another book value increase.

I think that's one example, but I'm not sure. Maybe someone else can explain it better.
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#3
I only do not like example with upgrade of machinery which magically started to cost something more, damn, for sure it is, problem really lies that it have costed some money to upgrade it really. And you do not take it all in account anyway. Thanks!
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#4
Mathematically, book value is calculated as the difference between a company's total assets and total liabilities. For example, if Company XYZ has total assets of $100 million and total liabilities of $80 million, the book value of the company is $20 million. In a broad sense, this means that if the company sold off its assets and paid down its liabilities, the equity value or net worth of the business would be $20 million. Total assets include all kinds of assets, such as cash and short term investments, total accounts receivable, inventories, net property, plant and equipment (PP&E), investments and advances, intangible assets like goodwill, and tangible assets. Total liabilities include items like short and long term debt obligations, accounts payable, and deferred taxes.
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