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The Difference Between Price and Values in Stocks

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What is the right price for a stock? Is it book value, liquidation value or is it simply its market price at a given moment of time?

Would you value a privately-owned company where there is no market value different than a publicly owned company where there is a market price every day?

Is there a difference between "price" and "value." How would you define these terms?

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Solution Summary

Considerations when determining the right price for a stock and associated value including differences between publicly traded companies and privately-owned firms.

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The right price for a stock is the price that someone or some entity will pay. It really is a difficult question to answer in a broad sense without selecting a specific stock or company. Book values are calculated based on a company's balance sheets. Liquidation values are what a firm would be worth if all assets were quickly liquidated to cash and debts settled. What's left is your liquidation value. Due to certain practices involved with GAAP accounting, liquidation values are not always what's recorded on a balance sheet for example the value of a factory will initially ...

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