Written Assignment Book vs Market Values

Under current accounting standards, financial statements are reported on an historical cost (i.e., book value) basis. However, book values are generally not all that useful for making decisions about the future because of the historical nature of the numbers of the valuation of a firm and its assets.

The passage of time and changing circumstances will almost always mean that the price an asset would fetch if sold today is quite different from its book value.Too, some of the most important assets and liabilities do not show up on the balance sheet. For example, the people that work for a firm can be very valuable assets, but they are not included on the balance sheet. This is especially true in-service industries.

1. Explain the difference between accounting value and market value- addressing how market values could be more relevant values for financial decision-making.Which do you believe is the more important to the financial manager?
2. Provide three separate measures of how the market value can be used to create a a more realistic picture of a firm's financial condition.
3. Given your analysis of this topic- which would you expect to be more affected- assets or liabilities?

Criteria:

1. General discussion and supported arguments on book value vs. Market value.
2. Three viable measures of market and book value differences.
3. Decision and justified answer- assets or liabilities.