Trade with Quant

  Why Book Value can’t be the perfect floor price of a company? Is there any better measurement? What is the way to compute that better option/s? Author:- Sonia Taneja(NIT Kurukshetra) Before answering the statement that book value can’t be the floor price, let us first know what the book value is: Book Value: Book value is the value at which the assets and liabilities are mentioned in the financial statements of an entity. In the book value, the values of the assets are mentioned after deducting the depreciation from them and goodwill is not mentioned. For example, if in an entity, there is machine worth Rs. 600,000 and its life has been estimated for 10 years and every year it is depreciated at 10% in the straight down method. In every year, 60,000 will be deducted from the assets value and remaining value would be mentioned in the balance sheet’s asset side for the 10 years and in the 11 th year, the value asset would be nil. Now let us understand what the Floor Pric...