TRISTAN: Yes, I do. Let's see if we can make these terms make sense by talking through their meaning and their significance to investors. The term book value has several uses. It can refer to a single asset or the company as a whole. When referring to an individual asset, such as a piece of equipment, book value refers to the asset's , adjusted for any accumulated depreciation or amortization expense. The value, or difference between these two values, is called the asset's book value. was reported In contrast, when the term refers to the entire company, it means the total value of the company's in the firm's ANNIE: 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, including the of Treasury stock, the sale of new common or preferred shares, and the payment of Equally important, it V change in response to changes in the market prices of the firm's shares. TRISTANI Right So, how useful would a firm's book value be for assessing the performance of Water & Power's management? ANNIE: 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 maximize the shareholder wealth and therefore be used to evaluate management's performance Now, what about "Market Value Added"? TRISTAN: During the 1990s, the consulting firm Stern, Stewart & Company developed the concept of Market Value Added, or MVA, to better assess management's performance in maximizing their shareholders wealth. To achieve this, a fim's MVA is computed as the between (of) the value and the value of Water Power's shareholders' equity. OK, now here's a question for you: Compared to the book value, what is the advantage of the MVA as a means of evaluating management's performance? ANNTEI Well, I would say that because the market value of Water by the number of shares management's performance. A positive assessment will result in shareholders' equity is calculated by multiplying the shares' will nuctuate depending on how the market perceives market price and MVA TRISTAN. Nicely donel Does this make your reading of Water Power annual report easier TRISTAN: Yes, I do. Let's see if we can make these terms make sense by talking through their meaning and their significance to investors. The term book value has several uses. It can refer to a single asset or the company as a whole. When referring to an individual asset, such as a piece of equipment, book value refers to the asset's , adjusted for any accumulated depreciation or amortization expense. The value, or difference between these two values, is called the asset's book value. was reported In contrast, when the term refers to the entire company, it means the total value of the company's in the firm's ANNIE: 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, including the of Treasury stock, the sale of new common or preferred shares, and the payment of Equally important, it V change in response to changes in the market prices of the firm's shares. TRISTANI Right So, how useful would a firm's book value be for assessing the performance of Water & Power's management? ANNIE: 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 maximize the shareholder wealth and therefore be used to evaluate management's performance Now, what about "Market Value Added"? TRISTAN: During the 1990s, the consulting firm Stern, Stewart & Company developed the concept of Market Value Added, or MVA, to better assess management's performance in maximizing their shareholders wealth. To achieve this, a fim's MVA is computed as the between (of) the value and the value of Water Power's shareholders' equity. OK, now here's a question for you: Compared to the book value, what is the advantage of the MVA as a means of evaluating management's performance? ANNTEI Well, I would say that because the market value of Water by the number of shares management's performance. A positive assessment will result in shareholders' equity is calculated by multiplying the shares' will nuctuate depending on how the market perceives market price and MVA TRISTAN. Nicely donel Does this make your reading of Water Power annual report easier
