Question

In: Accounting

The total amount of stockholders' equity reported on the balance sheet is often: Select one: a....

The total amount of stockholders' equity reported on the balance sheet is often:

Select one:

a. not accurate due to too many estimates

b. all of the above

c. not representative of the value of the company to its stockholders

d. too hard for the average investor to locate

Solutions

Expert Solution

The total amount of stock holder equity reported on the balance sheet is book value amount of the stockholders portion as an equity. It does not resembles the true and actual value of the equity as the assets and liabilities are at cost and not adjusted at the book value. Further the equity in the balance sheet is shown at cost it is being issued and additional paid up capital , it does not consider the market value of the equities being traded, so treating it as a value of company is not logical.

Further it is not correct that the total amount of stockholders equity is not accurate due to too many estimates and also that it's too hard for the average investors to locate , as all the estimations are made on accounting principles basis and the presentation is very systematic and clear on the face of the balance sheet.

Thus the correct option is ---​​​​---C.

i.e not representative of the value of the company to its stockholders.

ekkarill92 answered 1 year ago
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