Market value

Market value is the price at which a product or service could be sold in a competitive, open market. The concept is the basis for several accounting analyses to determine whether the book value of an asset should be written down. Market value can be determined most easily when there are a large number of willing buyers and sellers that engage in purchases and sales of similar products on an ongoing basis.

Market value is more difficult to determine when the preceding factors are not present. If so, an appraiser may be used to compile a reasonable approximation of market value.

The concept also refers to the market capitalization of a publicly-held entity, which is the number of its shares outstanding multiplied by the current price at which the shares trade.

Related Courses

Fair Value Accounting