Question

Why is it important for a company to measure the value of assets such as stocks, bonds, land and equipment? What types of problems might occur if these assets are valued incorrectly?

Answer 1

It is important for a company to measure the value of assets such as stocks, bonds, land and equipment as it helps in correct valuation of different assets and liabilities. It helps in getting right value of assets in case it is sold. If a company doesn't know the correct price of it's assets, it is bound to be get sold at some loss and company will eventually take the hit.

Proper asset valuation help in adequate asset funding as financing institutions analyse different assets which are owned by the company to keep them as a collateral against issuance of loans.

A business which value it's assets properly is bound to pay adequate taxes in advance and avoid different litigations

It is important to know appropriate value of a company in case of merger and acquisition and a proactive company will get valued adequately as there is less scope of undervaluation as company knows it's value in advance.

If a company doesn't value it's assets properly , it is bound to get undervalued at times and other companies will not even purchase it's assets at lower price but also sell their assets at overvalued price so it is always important to know the value of Assets .