What is "asset value" and why is it important?

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readerofbooks eNotes educator| Certified Educator

The is a great question. An asset value is the value of share in a company. This is usually calculated by looking at the total assets of a company minus its liabilities and dividing this by the number of shares that the company issues. Another way to look at this is the asset value is the equity value of a company. 

This is an important number for several reasons. First, this number is important to evaluate companies properly. As you can imagine, this would be important if a company is going to go public.

Second, this number is also important for investors. Investors might want to pull out of a company is they believe that this company is overvalued and not going to be profitable. For potential investor, this number will be important to see whether they actually want to invest. Many smart investors would like to buy into companies that are undervalued.