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Simple English definitions for legal terms
book equity
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A quick definition of book equity:
Book equity refers to the portion of a company's value that is assigned to a specific type of stock. It is calculated based on the company's book value, which is the value of its assets minus its liabilities. Book equity is different from market equity, which is the value of a company's stock based on its current market price.
A more thorough explanation:
Definition: Book equity refers to the percentage of a company's book value that is allocated to a specific class of stock. It is different from market equity, which is the value of a company's stock based on current market prices.
Example: Let's say a company has a book value of $1 million and has issued two classes of stock: Class A and Class B. If Class A stock is allocated 60% of the book value, then the book equity for Class A would be $600,000.
Explanation: This example illustrates how book equity is calculated based on the percentage of a company's book value allocated to a specific class of stock. In this case, Class A stock is allocated 60% of the book value, so its book equity is $600,000.