market value

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In general: market price—the price at which buyers and sellers trade similar items in an open marketplace. In the absence of a market price, it is the estimated highest price a buyer would be warranted in paying and a seller justified in accepting, provided both parties were fully informed and acted intelligently and voluntarily.


Investments: current market price of a security—as indicated by the latest trade recorded.


Accounting: technical definition used in valuing inventory or marketable securities in accordance with the conservative accounting principle of “lower of cost or market.” While cost is simply acquisition cost, market value is estimated net selling price less estimated costs of carrying, selling, and delivery, and, in the case of an unfinished product, the costs to complete production. The market value arrived at this way cannot, however, be lower than the cost at which a normal profit can be made.

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1. the theoretical highest price a buyer, willing but not compelled to buy, would pay, and the lowest price a seller, willing but not compelled to sell, would accept.


2. the definition of market value used by agencies that regulate federally insured financial institutions in the United States is:
The most probable price that a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.
Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:
1. buyer and seller are typically motivated; 2. both parties are well informed or well advised, and acting in what they consider their best interests; 3. a reasonable time is allowed for exposure in the open market; 4. payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and 5. the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.
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Example: An appraisal of a home indicates its market value is $150,000. In a normally active market, the home should sell for this amount if allowed to stay on the market for a reasonable time.
The owner may, however, deed the home to a relative for $250.
The owner may also grow impatient and sell for $140,000.
Conversely, an anxious buyer may be found who pays $160,000.
Finally, the owner may provide favorable financing and sell for $170,000.

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This entry contains information applicable to United States law only.

The highest price a willing buyer would pay and a willing seller would accept, both being fully informed, and the property being exposed for sale for a reasonable period of time. The market value may be different from the price a property can actually be sold for at a given time (market price). The market value of an article or piece of property is the price that it might be expected to bring if offered for sale in a fair market; not the price that might be obtained on a sale at public auction or a sale forced by the necessities of the owner, but such a price as would be fixed by negotiation and mutual agreement, after ample time to find a purchaser, as between a vendor who is willing (but not compelled) to sell and a purchaser who desires to buy but is not compelled to take the particular article or piece of property.

1. The current quoted price at which investors buy or sell a share of common stock or a bond at a given time. Also known as "market price".

2. The market capitalization plus the market value of debt. Sometimes referred to as "total market value".

Investopedia Says:
1. In the context of securities, market value is often different from book value because the market takes into account future growth potential. Most investors who use fundamental analysis to pick stocks look at a company's market value and then determine whether or not the market value is adequate or if it's undervalued in comparison to it's book value, net assets or some other measure.

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Learn how to evaluate a stock with a few easy-to-identify patterns. Analyzing Chart Patterns

For a list of words related to market value, see:

• Real Estate Practice - market value: amount a piece of property is likely to bring when offered for sale on open market

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