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What is Book Value, Face Value and Market Value

By News Canvass | Aug 30, 2023


When it comes to understanding investments, financial statements, and the valuation of assets, terms like face value, book value, and market value play a pivotal role. Each of these terms has specific meanings and applications in finance. This comprehensive guide will delve into the differences between face, book, and market value, highlighting their significance and usage in various scenarios.

Difference between Face Value, Book Value, and Market Value

This section will discuss the critical distinctions between face, book, and market value, offering insights into their importance.

Face Value

Face value refers to the nominal or par value of a financial instrument, such as a bond or a stock, as indicated on the instrument. It represents the initial value assigned to the security during issuance. For instance, if you hold a bond with a face value of $1,000, the bond will mature and be redeemed at this amount. Face value remains constant throughout the life of the security and is used primarily for accounting purposes.

Book Value

Book value, also known as net asset value (NAV), measures an entity’s total net worth or equity. It determines the value of a company’s assets that shareholders would receive in liquidation by subtracting liabilities from assets. Book value provides insights into the company’s intrinsic value based on its financial statements and can be a useful metric for value investors.

Market Value

On the other hand, market value is the current price at which a financial instrument or asset can be bought or sold in the open market. Various factors influence it, including supply and demand, investor sentiment, economic conditions, and company performance. Market value is dynamic and can fluctuate significantly over time, often deviating from an asset’s face value and book value.

Key Differences

The table below highlights the main differences between face value, book value, and market value:


Face Value

Book Value

Market Value


Nominal value on the security

Net worth of the company

Current market price


Accounting and legal context

Investment analysis

Buying and selling in market


Remains constant

Historical and intrinsic value

Dynamic and fluctuating


Relevant for issuance

Relevant for valuation

Reflects current market sentiment


Stated on the instrument

Assets – Liabilities

Determined by market forces

Understanding the Significance

Importance of Face Value

Face value is crucial in determining the maturity amount of a bond or the nominal value of a share. It serves as a reference point for accounting entries and legal matters related to the financial instrument. However, it’s important to note that face value doesn’t necessarily reflect the security’s market value.

Significance of Book Value

Book value is precious for investors looking to understand a company’s financial health. It provides insights into how assets are distributed in the business and can aid in assessing the company’s overall value relative to its obligations. Investors might undervalue companies trading below their book value.

Role of Market Value

Market value is the real-time indicator of an asset’s worth. Investors use market value to make decisions about buying or selling assets. Many factors influence investor sentiment, company performance, economic conditions, and external events.


In conclusion, understanding the difference between face value, book value, and market value is essential for anyone navigating the complex world of finance and investments. These terms provide insights into valuation aspects, from the nominal value of securities to a company’s intrinsic and current market perception. By grasping these concepts, investors and individuals can make informed decisions that align with their financial goals and risk tolerance.

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