Discuss the difference between book values and market values and explain which one is more important...

Discuss the difference between book values and market values and explain which one is more important to the financial manager and why.

Solutions

Expert Solution

BOOKVALUE

It is the historical cost of an asset or it is the cost of purchase of an asset adjusted with depreciation. It is the value shown on balance sheet. It is the amount we get when the company got liquidated. It is the actual worth of asset. Book value do not change frequently.

MARKET VALUE

Is the value of asset in the market if it is traded. Market value can be obtained by multiplying total number of shares with current market price per share. A change in market value can happen if there is any change in profitability liquidity of a company. It is the projected value of asset. Market value changes frequently. It reflects market trends and is the intrinsic value of asset.

Main aim of financial managers is to maximise shareholders wealth and pay more dividends there by increasing market value of the firm.Market value is more important as it is more up to date. A financial manager valuates market value of assets or firm. Market value increases when the market thinks that firm have higher value as the earnings of company are high. So the financial manager gives more importance to market value rather than book value.

If market value is greater than book value means market is giving high value to the firm. But if book value is higher than market value that means shareholders are loosing confidence in the company.

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Explain the difference between accounting(Book) value and market value. Which is more important to the financial...

Explain the difference between accounting(Book) value and market value. Which is more important to the financial manager? Why?

Explain the difference between accounting value and market value. Which is more important to the financial...

Explain the difference between accounting value and market value. Which is more important to the financial manager? Why? Why is interest paid not a component of operating cash flow?

What is the difference between "accounting profit" and "economic profit?" Which one is more important for...

What is the difference between "accounting profit" and "economic profit?" Which one is more important for determining whether to operate or close down a business that you own?

Explain the difference between book value and market value. Give an example of when a book...

Explain the difference between book value and market value. Give an example of when a book value and market value are significantly different for a (1) current asset and (2) fixed asset.

Discuss the difference between absolute advantage and comparative advantage. Which is more important in determining trade...

Discuss the difference between absolute advantage and comparative advantage. Which is more important in determining trade patterns? Justify your answer.

Discuss the difference between absolute advantage and comparative advantage. Which is more important in determining trade...

Discuss the difference between absolute advantage and comparative advantage. Which is more important in determining trade patterns? Justify your answer. Please do not copy and paste.

Why is the difference between market and book value important? What measures are used to assess...

Why is the difference between market and book value important? What measures are used to assess financial performance?

2. Explain the difference between par value, book value, and market value for common stock. Which...

2. Explain the difference between par value, book value, and market value for common stock. Which is most important? Why? 3. What is meant by market efficiency? What are the three types of market efficiency? 4. What rights are given to stockholders? Explain each.

Discuss the difference between market allocation of resources and government allocation of resources. Which one provides...

Discuss the difference between market allocation of resources and government allocation of resources. Which one provides for a more efficient allocation?

Explain the difference between Community health/ Public health /Personal health .which one is most important in...

Explain the difference between Community health/ Public health /Personal health .which one is most important in improving the health outcomes for our Nation . Why?

Subjects