Markets · 6 pages · 12 min

Why a factory's book value is not its sale price

A factory's book value is cost minus depreciation, not the bid a buyer would make for the plant.

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From the opening

The book value of a factory is usually the historical cost of the buildings and equipment minus the depreciation already taken. That net figure is an accounting remainder of past spending, not an offer, an appraisal, or the cash a buyer would hand over tomorrow. The opening covers cost less depreciation remains, a bid depends on use, and sale creates a gain or loss.

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Inside

Cost less depreciation remains
A bid depends on use
Sale creates a gain or loss
Zero book is not scrap
Where the idea stops applying
A distinction worth keeping

Sources

Depreciated historical cost of plant
Gain or loss on disposal

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Why a factory's book value is not its sale price

From the opening

Inside

Sources

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