# Net Book Value ( NBV )

Investment Formula Description

Net Book value ( NBV ) is net value of an asset, which equal to its original cost minus accumulated depreciation and amortization.

Hence, sometimes, net book value ( NBV ) for an asset is also referred as depreciated cost or book value. If apply on companies, net book value has same meaning with book value or net asset value ( NAV ) , which is net value for an company and will be used in price book ratio ( P/B ratio ) and market to book ratio to compare market value and book value of an company. Net book value ( NBV ) for assets is purely estimate as the prediction on an asset's useful life might not accurate. However, net book value ( NBV ) can give investors the rough idea of the asset values. Besides, for assets, net book value ( NBV ) can be used to measure the value of long term liabilities, which will be amortized, such as bonds.

Investment Formula

Net Book value ( NBV ) = Cost of Assets - Accumulated depreciation

Net Book value ( NBV ) = Total Assets - Intangible Assets - Liabilities

Investment Formula Example

Corporation XYZ bought a machine with \$3,000 and expect it has useful life of 3 years. On the next year, the net book value ( NBV ) calculation for this machine is as following.

Accumulated Depreciation = Depreciation per year X Total Years =  1,000 X 1 = \$1,000

Net Book Value ( NBV ) = Cost of Assets - Accumulated Depreciation = 3,000 - 1,000 = \$2,000

The net book value ( NBV ) for this machine on next year is \$2,000 after it was depreciated for \$1,000. Another year later, the net book value ( NBV ) for this machine will become \$1,000.

The following example is net book value ( NBV ) 's example for companies.Total Assets for corporation XYZ is \$500,000 while the intangible assets is \$250,000 and the liabilities is \$70,000. The net book value ( NBV )  calculation for corporation XYZ is as following.

Net Book Value ( NBV )  = Total Assets - Intangible Assets - Liabilities = 500,000 - 250,000 -70,000 = \$ 180,000

The net book value ( NBV ) for corporation XYZ is \$180,000.