1. Which would you expect to find more useful financial statements for evaluating management performance: financial...

1. Which would you expect to find more useful financial statements for evaluating management performance: financial statements based on fair value or historic cost? Why?

Solutions

Expert Solution

For evaluating a management performance, I would choose fair value or Mark to market value.

There has been a heated debate between the users of historical cost and fair value. Where historical is cost is the actual acquisition value of the asset, fair value is the realizable value of the asset as of today if we were to sell it in the market.

Far value helps in gauging the company on real terms in many ways.

1. What is the actual value of assets today? It is because the performance is based on prices prevailing at that point of time.

2. Financial ratios or metric which employ balance sheet items to measure the performance of the company.

3. At the point of liquidation, stakeholders need to know the value of the company and performance as per fair value.

That being said there is a fatal flaw with fair value, if the market is negatively affected the price of balances sheet items can drop significantly which was seen earlier during the The Financial Meltdown, 2008.

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Present a Detailed Report on Global Financial Management and Evaluating Performance.

Which 3 variances are the most useful for evaluating performance and why? Be sure to explain...

Which 3 variances are the most useful for evaluating performance and why? Be sure to explain each of the variances you select.

1. (a.) Consider the following pairs of goods. Which would you expect to have more elastic...

1. (a.) Consider the following pairs of goods. Which would you expect to have more elastic demand? Explain each. (i) Food in general or rice (ii) Liquefied gas over a course of one month or liquefied gas over a course of a year. (iii) Television set or automobile (car). (iv) Water or diamonds.

1.) You would expect to find product differentiation in which market structures? a. Natural monopoly and...

1.) You would expect to find product differentiation in which market structures? a. Natural monopoly and oligopoly b. Oligopoly and monopolistic competition c. Monopolistic competition and monopoly d. Very competitive markets only 2.)A firm should not shut down if a. It can cover variable costs b. All of these c. Variable costs are greater than fixed costs d. Fixed costs are very low 3.)If marginal cost is greater than marginal revenue the firm should a. Exit the market b. Shutdown...

1/ At which location below would you most expect to find a year-round desert? a. in...

1/ At which location below would you most expect to find a year-round desert? a. in the frigid polar regions b. along 60° north and south latitudes c. within Mediterranean climate zones d. on windward sides of large mountain ranges 2/ Humid subtropical climates are found principally _____ of continents, roughly between 25° and 40° latitude. a. in windward mountainous regions b. in the interiors c. along the west coasts d. along the east coasts 3/ Because of the dry...

Identify the financial statements in which you would find each of the items listed below. Some...

Identify the financial statements in which you would find each of the items listed below. Some items may appear on more than one statement. Indicate all financial statements that apply to each item. The possible choices are: B : Balance Sheet SE : Statement of Stockholders’ Equity I : Income Statement CF : Statement of Cash Flows Financial Statement Item Financial Statement a. Cost of goods sold b. Trademarks c. Inventories d. Retained earnings e. Unearned revenue f. Cash...

Which company of each of the following pairs would you expect to be more exposed to...

Which company of each of the following pairs would you expect to be more exposed to macro risks? Pick one pair (Pair A or Pair B) and discuss. For example, if you chose Pair A, do you think it is the luxury Montreal restaurant or the established Burger Queen franchise that would be more exposed to macro risks? A luxury Montreal restaurant or an established Burger Queen franchise? B.A paint company that sells through small paint and hardware stores to...

• Which would you expect to be more ‘own-wage’ elastic: the demand for surgeons, or the...

• Which would you expect to be more ‘own-wage’ elastic: the demand for surgeons, or the demand for restaurant workers? Explain, using Hicks – Marshall Laws of Derived Demand.

Practice Problems (Chapters 7 and 8) Chapter 7 1. Which would you expect to be more...

Practice Problems (Chapters 7 and 8) Chapter 7 1. Which would you expect to be more variable: (a) the distribution of scores in a population or (b) the distribution of sample means based on random samples of 25 cases from this population. Explain. Given a normal distribution of scores that has a mean of 50 and a standard deviation of 10, what is the probability of selecting a score that is greater than 65? If a random sample of 10...

1,Ceteris paribus, which countries would you expect to rely MORE on foreign trade as a percentage...

1,Ceteris paribus, which countries would you expect to rely MORE on foreign trade as a percentage of their economic activity? A larger countries, like the US. B smaller countries, like Sweden 2. An economy’s net exports always equals (choose one or both) A the difference between its saving and its investment B its trade balance 3. An economy’s trade balance always equals (choose one or both) A net capital outflow B net foreign investment

Subjects