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?

Expert Solution

Accounting Value	Market Value

That value which is decided based upon enterprise accounting profit & loss (production,sale,purchase,expenses) i.e. actual value which could be attained by a investor in long term.	That value which is decided based upon demand and supply in market (including investors predictions ,TV news)

Among them more Important from Financial Manager's Point of view :

From Financial Manager's Point of view Market value is more important because now as per IFRS fair value concept is used for valuation right now i.e. market value

Interest paid component as component of operating cash flow:

Operating cash flow is dervied from operating cycle i.e.

Purchase:production:sale

So interest paid on amount borrowed for business purpose is an indirect expense not opeating expense:

hence not be treated as an component of operating cash flow.

jeff jeffy answered 1 year ago

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