Please explain the difference between the "market capitalization" value of a company and its "book" value

Market Capitalization :

Market Capitalization is also known as Market value of equity. It factors into all the available information in the stock price.Market capitalization is the value for the company that is assumed by the market forces taking in consideration current earnings as well as future earning and growth prospects.

Market capitalization is used by investors, number analysts, newspapers because the amount of market capitalization represents the worth of the company/ value of the business.

It is measured by :

Market capitalization = Current Market price of share * Number of common shares outstanding

Example :

Suppose you want to purchase XYZ ltd. Each share of the company trades for $ 5 and the company has 100,000 shares outstanding, then you should have paid the amount of

$ 5 * 100,000 = $ 500,000

Book Value :

On the other hand Book value is the value of the firm equity based on balance sheet. Book value is the value of a company on the basis of the Assets and Liabilities shown in the Balance Sheet. Means the values of Assets and Liabilities are taken at their Balance Sheet figures to compute the value of a company. The book value of asset is the original value of an asset less its depreciation, amortization and impairment costs.It may or may not reflect true value of the company equity. Also, it does not factors into future growth and earning prospects of the company

book value of assets is measured by the fixed assets minus liabilities and intangible assets (i.e. goodwill), but it depends upon the source or method of calculation.

Example

If Company Phoroah Ltd. has total assets of $ 85 million and total liabilities of $ 60 million, the book value of the company is $ 30 million.

This means that if the company sold off its assets and paid down its liabilities, the equity value or net value of the business, would be $ 30 million.