Question

Which of the following explains why a company’s book value as reported in the balance sheet may not equal the company’s market value? I. Many assets are measured at their historical cost rather than amounts for which the assets could be sold. II. Many valuable resources of the company are not directly reported as assets in the balance sheet. III. Investors do not use the balance sheet to judge a company’s value.

Answer 1

Answer: "I. Many assets are measured at their historical cost rather than amounts for which the assets could be sold." explains why a company’s book value as reported in the balance sheet may not equal the company’s market value.

Explanation: Normally non-current assets (fixed assets) are valued at their historical acquisition cost, therefore the difference between the market value and the book value of a company occurs