Login | November 04, 2025
Book value, explained
THE MOTLEY FOOL
Ask the Fool
Published: November 4, 2025
Q: What's a company's book value? -- R.S., Anchorage, Kentucky
A: It's an accounting measure reflecting the company's total assets less its total liabilities -- in other words, it's shareholder equity, or what shareholders might get if the company were liquidated and debts and obligations were covered.
Book value is not as useful a measure as it used to be, though. It worked well when most businesses were simpler and capital-intensive, with assets such as factories, equipment and land appearing on the balance sheet. Today, though, more companies are service-oriented; high-tech companies may have lots of intangible assets, such as patents and goodwill (an accounting measure often involved in acquisitions).
Consider the ride-sharing company Uber Technologies, for example. As of June 30, its total assets were nearly $56 billion and total liabilities more than $32 billion, which leaves shareholder equity (book value) of roughly $23 billion. That's far less than its recent market value of around $190 billion.
Meanwhile, imagine a company that owns lots of buildings: Over many years, their value on the balance sheet will be depreciated, perhaps to zero. They're not really worth zero, of course, and they may even appreciate in value over time. Such a company can also be worth much more than its book value.
It's often better to ignore book value, but value investors sometimes calculate companies' price-to-book ratios to help identify undervalued stocks. Research book value further if you're so inclined.
Q: What's a "basis point"? -- G.M., Bremerton, Washington
A: It's 1/100th of a percentage point, or 0.01%. One hundred basis points make up 1%. So if an interest rate falls by 25 basis points, it's down a quarter of a percentage point.
Fool's School
Make These Savvy 401(k) Moves
If you have access to a 401(k) plan at work, you should make the most of that powerful retirement savings tool. Here are some tips:
-- Be sure to participate each year.
-- Name your beneficiary or beneficiaries.
-- Contribute at least enough each year to max out any available matching funds. Many employers will match your contributions to some degree -- say, a 50% match for up to 6% of your salary. So if you earn $70,000, and contribute 6% ($4,200) or more of your salary to your 401(k) account, your employer would chip in an additional $2,100. That's free money, and an instant, risk-free 50% return.
-- If you can, contribute aggressively to your account. For 2025, the 401(k) contribution limit is $23,500, with an additional $7,500 "catch-up" contribution allowed for those 50 or older -- totaling $31,000. Those age 60 to 63 by the end of 2025 can contribute an extra $11,250 in 2025, for a grand total of $34,750.
-- Consider opting for a Roth 401(k) account, if it's available. These accounts are funded with no up-front tax break, but if you follow the rules, you (and your heirs) can eventually withdraw money from the account tax-free.
-- For money you can leave in the account for many years, it's hard to beat the stock market. Favor low-fee, broad-market stock funds from your plan's investment menu -- such as an S&P 500 index fund and perhaps some broader and/or international index funds.
-- Don't borrow from or cash out your account if you can help it, as that can shortchange your future, and you may end up with penalties and taxes due. If you leave your job, you might roll your 401(k) into your new employer's 401(k), or into an IRA.
-- Know that traditional 401(k)s (and IRAs) call for required minimum distributions (RMDs) beginning at age 73.
A quick online search will turn up even more 401(k) tips.
My Smartest Investment
Lemonade Out of Lemons
Here's my smartest investment story: In 1992, I was in a traffic accident in which my 13-year-old daughter was injured. We got a payout of $15,000, and we gave $5,000 each to our daughter and her 11-year-old brother. They each invested $2,000 in a certificate of deposit, $1,500 in a mutual fund and $1,500 in stocks. When our son was old enough to get a summer job, he said "My investments now are at $9,000. I don't need a summer job!" Now both kids are adults with great portfolios, and a lot of investment knowledge that they learned from a young age. -- M.M., via email
The Fool responds: What a great story! And parents don't even need a car accident or windfall to do the same thing. If you're starting with just a little money, you and your kids can buy shares of low-fee index-fund exchange-traded funds (ETFs) -- such as the Vanguard S&P 500 ETF (VOO) -- or some shares of stocks. Your kids can learn more in "The Motley Fool Investment Guide for Teens: 8 Steps To Having More Money Than Your Parents Ever Dreamed Of" by David and Tom Gardner with Selena Maranjian (Touchstone, $20), or in other books. Teaching kids about money early is a brilliant move that can pay off well.
(Do you have a smart or regrettable investment move to share with us? Email it to TMFShare@fool.com.)
Foolish Trivia
Name That Company
I trace my roots to 2018, when Arby's bought Buffalo Wild Wings and Rusty Taco, and I was formed as their holding company. I bought Sonic Drive-In that year, too, followed by Jimmy John's in 2019 and Dunkin' Brands and Baskin-Robbins in 2020. Based in Atlanta, I recently boasted more than 33,000 restaurants in around 60 global markets, with more than $32 billion in global system sales. Dunkin' is America's biggest coffee-and-donuts brand, with more than 14,000 locations in almost 40 global markets. Arby's, founded in 1964, has 3,600-plus eateries, and there are 7,800-plus Baskin-Robbins locations. Who am I?
Last Week's Trivia Answer
I trace my roots back to 1968, when a Korean War vet from Wisconsin asked three Norwegian shipping companies to invest in a cruise company focused on a particular sea. Today, with a recent market cap near $100 billion and a fleet of 68 ships, I'm a cruise giant, traveling to seven continents. I carry millions of passengers each year. My brands include Celebrity Cruises, Silversea and my own name, and I own 50% of a joint venture that operates TUI Cruises and Hapag-Lloyd Cruises. My logo features something that sits high and something that goes low. Who am I? (Answer: Royal Caribbean Group)
The Motley Fool Take
Fallen Stock and Boosted Dividend
Target (NYSE: TGT) is a dividend powerhouse, having increased its payout for 54 consecutive years, but the company has been struggling. A turnaround may not happen this year, but if you believe that it will happen, you can collect a hefty dividend payment while you wait.
Target faces multiple challenges. Some, such as declining consumer confidence tied to uncertainty about the effects of the Trump administration's tariffs, are largely outside of its control. But other issues are the result of the company's own moves. Target has faced customer backlash after rolling back diversity, equity and inclusion (DEI) efforts. Foot traffic has reportedly fallen for several months in a row, including a 3.9% year-over-year drop for June, per retail news outlet Retail Brew.
To get back on track, Target is changing up its leadership team. It has replaced the role of its chief strategy officer with a group of experienced insiders. A Target veteran is now CEO.
Thanks mainly to its stock sinking over the last 12 months (it was down nearly 39% as of early September), the company's dividend yield has been pushed up to a recent 4.9. Meanwhile, the company continues to generate solid profits. Its stock is also valued attractively, with a forward-looking price-to-earnings ratio below 13, well under its five-year average of 16. (The Motley Fool owns shares of and recommends Target.)
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