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The relationship between the book value of hareholders'.quity and the firm s Market A Aa L Value Added (MNA) and Eoonomic value Added (EvA) Yesterday,

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The relationship between the book value of hareholders'.quity and the firm s Market A Aa L Value Added (MNA) and Eoonomic value Added (EvA) Yesterday, Water and Power Co. released its 2015 annual report on the company's website. While reading the report for her boss, Tessa came aaoss several terms about which she was unsure. She leaned around the wall of her abice and asked her colleague, Asher, for help. Tessa Asher, do you have a second to help me with my reading of Water & Power's annual report? I've come across several unfamiliar terms, and want to make sure thatI'minterpreting the data and management's comments correctly For example, one of the footnotes to the financial statements uses the book value of Water & Power's shares,' and then in another place, it uses "Market value Added. I've never encountered those terms before. Do you know what they're talking about? Asher Yes,Ido. Let's see r we can make these terms make sense by taking through their meaning and their significanoe to investors The term book value has several uses. It can refer to a single asset or the company as a whole. When refeming to an individual asset, such as a piece of equipment, book value refers to the asset's r adjusted for any accumulated depreciation or amortization expense. The value, or difference between these two values, is called the asset's book value. In contrast, when the term efen to the entire company, it means the total value of the company's as reported in the firm's Tessa That makes sense. So, what makes this value important to investors is that it is value that can change but only due to a couple of events, induding the of Treasury stock, the sale of new common or preferred shares, and the payment Equally important, it change in response to changes in the market prices of the firm's shares. Asher Right so, how useful would a fim's book value be forassessing the performance of water s Tessa Well, because Water & Power's book value with changes in the market price of the firm's shares, the firm's book value reflect management's efforts to the price of the firm's common stock and therefore be used to evaluate The relationship between the book value of hareholders'.quity and the firm s Market A Aa L Value Added (MNA) and Eoonomic value Added (EvA) Yesterday, Water and Power Co. released its 2015 annual report on the company's website. While reading the report for her boss, Tessa came aaoss several terms about which she was unsure. She leaned around the wall of her abice and asked her colleague, Asher, for help. Tessa Asher, do you have a second to help me with my reading of Water & Power's annual report? I've come across several unfamiliar terms, and want to make sure thatI'minterpreting the data and management's comments correctly For example, one of the footnotes to the financial statements uses the book value of Water & Power's shares,' and then in another place, it uses "Market value Added. I've never encountered those terms before. Do you know what they're talking about? Asher Yes,Ido. Let's see r we can make these terms make sense by taking through their meaning and their significanoe to investors The term book value has several uses. It can refer to a single asset or the company as a whole. When refeming to an individual asset, such as a piece of equipment, book value refers to the asset's r adjusted for any accumulated depreciation or amortization expense. The value, or difference between these two values, is called the asset's book value. In contrast, when the term efen to the entire company, it means the total value of the company's as reported in the firm's Tessa That makes sense. So, what makes this value important to investors is that it is value that can change but only due to a couple of events, induding the of Treasury stock, the sale of new common or preferred shares, and the payment Equally important, it change in response to changes in the market prices of the firm's shares. Asher Right so, how useful would a fim's book value be forassessing the performance of water s Tessa Well, because Water & Power's book value with changes in the market price of the firm's shares, the firm's book value reflect management's efforts to the price of the firm's common stock and therefore be used to evaluate

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