What is meant by Fair Market value (FMV)? What is the difference between FMV and Market Value (MV)?
FMV refers to the price at which a stock is worth on the open market. During the sale of stock, there are a set of criteria to be met:
- The parties involved are aware of all the facts.
- Are acting in their own interests.
- Are free of any pressure to buy or sell
- Have ample time to make the decision.
FMV versus MV
FMV is a broad measure of an asset's worth and is not the same as MV, which refers to the price of an asset in the marketplace.
FMV versus Book Value
Book value is the price paid for a particular investment or asset, whereas FMV is the current price at which that same asset can be sold. Book value and fair market value can work together to help investors determine how much they stand to gain or lose by selling off their assets.
| Book Value | Results In |
|---|---|
| Book Value > FMV | Sale at a loss |
| Book Value < FMV | Sale at a gain |
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