Book Values versus Market Values

 

 

 

2.3 Book Values versus Market Values In preparing a balance sheet. why do you think standard accounting practice focuses on historical cost rather than market value? 2.4 Operating Cash Flow In comparing accounting net income and operating cash flow, what two items do you find in net income that are not in operating cash flow? Explain what each is and why it is excluded in operating cash flow. 2.5 Book Values versus Market Values Under standard accounting rules, it is possible for a company’s liabilities to exceed its assets. When this occurs, the owners’ equity is negative. Can this happen with market values? Why or why not? 2.6 Cash Flow from Assets Suppose a company’s cash flow from assets was negative for a particular period. Is this necessarily a good sign or a bad sign? 2.7 Operating Cash Flow Suppose a company’s operating cash flow was negative for several years running. Is this necessarily a good sign or a bad sign? 2.8 Net Working Capital and Capital Spending Could a company’s change in NWC be negative in a given year? (Hint: Yes.) Explain how this might come about. What about net capital spending? 2.9 Cash Flow to Stockholders and Creditors Could a company’s cash flow to stockholders be negative in a given year? (Hint: Yes.) Explain how this might come about. What about cash flow to creditors? 2.10 Firm Values In February 2017, Toshiba announced that it was writing off $6.3 billion due to its acquisition of nuclear power plant construction firm CB&I Stone & Webster only a year before. We would argue that Toshiba’s stockholders probably didn’t suffer as a result of the reported loss.

Sample Solution

Book Values versus Market Values

A historical cost is s a measure of value used in accounting in which the value of an asset on the balance sheet is recorded at its original cost when acquired by the company. Under general accepted accounting principles (GAAP) in the U.S., the historical cost principle is based on the amount of capital spent to buy them. In the historical cost principle, most assets are to be recorded on the balance sheet at their historical cost even if they have significantly increased in value over time. Standard accounting practices focuses on historical cost rather than market value because this method is based on a company`s past transactions and is conservative, easy to calculate, and reliable.

Franklin Delano Roosevelt, known to many as FDR, was not only a leader for his time, but a leader for all times. Not only did FDR successfully lead his nation through possibly the two most dramatic, and consequential world events of the 20th century, the Great Depression and WW2; he is also responsible for spearheading the creation of the United Nations, as well as the series of programs, projects, policies and laws that came to be known as the “New Deal”. Through his experimentation and willingness to listen and learn from others, FDR demonstrated that he was the man to lead America forward. FDR’s actions throughout his presidency shaped not only the way Americans lived their lives, but how the world perceived America for decades to come. Throughout his presidency, FDR was able to display his brilliance in leadership. However, what was the greatest achievement in each of his four terms? And perhaps most interesting of all, what was his greatest failure? For his brilliance in leadership, as well as a lack of competent competitors, the American people rewarded him with an unprecedented four terms in office. In his first term he successfully tiptoed around the edge of the precipice, leading the American people from the turmoil caused by the Great Depression. In his second term, perhaps his most undervalued achievement was the packing of the supreme court, for it was here where you can see the long lasting impact. His third term was dominated by World War Two and the successes enjoyed by the allies. In his fourth term, despite the brevity of it, he was able to establish the foundations of the modern United Nations. Truly a leader for all times. From the moment FDR won the governorship of New York State, to the moment he became president of the United States of America, you see an unparalleled level of political victories. In his first presidential campaign, the elites of the democratic party thought that they could control him. In the end, their underestimation of FDRs coolness proved costly, with him ultimately using it to his advantage. History tells us that the world was overall, a better place because of his actions, but what exactly did he do to transform America in specific, and

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