Real value

By:

James Knight

James is a lead editor for Invezz, where he covers topics from across the financial world, from the stock… read more.

Updated: Aug 20, 2021

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In general, the term ‘real’, as used to describe value or price, refers to value excluding fluctuations brought about by inflation or deflation. It is mostly used in making comparisons over a period when prices have reacted to arbitrary and artificial pressures which do not reflect genuine worth. This concept is very important in published figures, e.g. profits, dividends, wages, etc., when it is necessary to restate current figures in terms of prices ruling at the time when the figures with which they are being compared were compiled. This is done by applying an appropriate index number. Real value may also be applied to money itself, e.g. the real value of a 1985-pound sterling may be only 50 pence at 1977 prices.

Reference: The Penguin Business Dictionary , 3rd edt.