Intrinsic Value
Intrinsic value is a concept used in finance to describe the perceived or calculated value of a company, stock, currency or product. It is also used in accounting to describe the value of an asset after taking into account any depreciation, amortization and accrued liabilities. Intrinsic value is an important concept in investing, as it can help investors determine whether an asset is undervalued or overvalued. Intrinsic value is also used in options trading, where it is used to determine the value of an option.
History of Intrinsic Value
The concept of intrinsic value has been around since the early days of finance. It was first used by the ancient Greeks, who believed that the value of an asset was determined by its usefulness or utility. This concept was later adopted by the Romans, who used it to determine the value of coins and other assets. In the 18th century, the concept of intrinsic value was further developed by economists such as Adam Smith and David Ricardo. They argued that the value of an asset was determined by its scarcity and the amount of labor required to produce it.
In the 19th century, the concept of intrinsic value was further developed by economists such as John Stuart Mill and Alfred Marshall. They argued that the value of an asset was determined by its usefulness or utility, as well as its scarcity and the amount of labor required to produce it. This concept was later adopted by investors, who used it to determine the value of stocks and other investments.
Comparison Table
| Intrinsic Value | Market Value |
|---|---|
| Calculated value of an asset | Price of an asset in the market |
| Takes into account depreciation, amortization and accrued liabilities | Does not take into account depreciation, amortization and accrued liabilities |
| Determined by usefulness, scarcity and labor required to produce it | Determined by supply and demand |
Summary
Intrinsic value is a concept used in finance to describe the perceived or calculated value of a company, stock, currency or product. It is an important concept in investing, as it can help investors determine whether an asset is undervalued or overvalued. Intrinsic value is determined by its usefulness, scarcity and the amount of labor required to produce it, while market value is determined by supply and demand. For more information about intrinsic value, you can visit websites such as Investopedia, The Balance, and Investing.com.
See Also
- Market Value
- Book Value
- Fair Value
- Time Value
- Liquidation Value
- Replacement Value
- Opportunity Cost
- Marginal Utility
- Scarcity Value
- Utility Value
