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Do all the firm’s assets and liabilities appear on the financial statements or are some ignored?...

Do all the firm’s assets and liabilities appear on the financial statements or are some ignored? How useful is a measure of past value creation in a world where the value of any firm has more to do with the future than the past?

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Expert Solution

All the assets and liabilities of the companies are not reflected on the balance sheer, because there is a concept of off balance sheet items which is impacting the financial condition of business to large extent and off balance sheet financing is a type of financing in which methods of Financing is used which is not reflected in the books of accounts like securitization of various debt or leases which are entered into by the company which are not recorded on the balance sheet of a company.

Past value creation is also important because past value creation is reflecting the value created by the company in the past which is reflecting the ability of the company to create value for its stakeholders and shareholders and it is also reflecting that the company has been in providing with the higher rate of return or it has been a laggard in the particular industry, so past value creation is also important in order to analyse about the estimates of the future value which can be created by the company, so before estimation of the future value creation, the past value creation is properly analysed by shareholders before investing into the company and hence it can be said that past value creation by the company should be properly analysed before investment into the company.

jeff jeffy answered 2 years ago
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