Asked by Michelle Bradley on Jul 05, 2024
Verified
The book value of a firm's capital accounts:
A) should be used when evaluating new projects.
B) fluctuates frequently.
C) represents the cost of existing capital.
D) Both a & c
Book Value
The net value of a company's assets minus its liabilities, often used to assess a company's worth from a financial statement perspective.
Capital Accounts
Financial records that show the capital contributions, withdrawals, and earnings of owners in a company.
- Distinguish between the book value and market value of capital and their relevance in financial analysis.
Verified Answer
AJ
alezandra jordanJul 08, 2024
Final Answer :
C
Explanation :
The book value of a firm's capital accounts represents the cost of existing capital, reflecting the historical cost of assets minus liabilities, rather than current market values or future project evaluations.
Learning Objectives
- Distinguish between the book value and market value of capital and their relevance in financial analysis.