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Book value is total assets less total liabilities. Some value investors believe it is appropriate to adjust (reduce) book value for goodwill, patents, and other intangible assets. Others believe these intangibles are real assets, and, therefore, no adjustment to book value is necessary. Others take a middle-of-the road position and apply, say, a "50% of intangibles" adjustment to book value.

There is no right answer that is appropriate in all cases. An investor needs to study the company, the industry, and the nature of the assets before deciding how much (if any) adjustment is appropriate in the circumstances.

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