By: Martin M. Shenkman, CPA, MBA, JD
The value of a business based on its accounting records or book value. This value is even cited in some laws (statutes) as a method of determining buy out prices in certain instances. It is often used in contracts. Book value alone, without specified adjustments, is rarely going to approximate fair value, so caution should be exercised in specifying its use. If the books and records of the business are maintained on the cash basis, book value may grossly understate real value by excluding accounts receivable and accounts payable.
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