What does "book value" of an asset refer to?

The term "book value" of an asset refers to the value of that asset as recorded on the balance sheet. This value represents the original cost of the asset minus any accumulated depreciation, amortization, or impairment costs that may have been recorded over time. Book value essentially reflects the accounting value assigned to an asset on a company's financial statements. This is crucial for assessing a company's financial health and for making decisions related to investments, as it provides insight into the asset's worth from an accounting perspective rather than its potential sale price or revenue-generating capability.

Understanding this concept helps in analyzing financial statements, making managerial decisions, and performing evaluations regarding asset management and company valuations.