The book value reflects the actual and real substance of a company and roughly corresponds to the company’s equity. On the balance sheet date, the book value indicates how much the company is worth according to its balance sheet. All assets are added up and reduced by depreciation and amortization and increased by possible write-ups. The company’s liabilities are finally deducted. This calculation results in the book value.
The book value indicates how much a company would actually be worth in terms of its substance if it were liquidated.