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Yesterday, Galaxy Corp. released its 2015 annual report on the Company's website. While reading the report for his boss, Asher came across several terms about
Yesterday, Galaxy Corp. released its 2015 annual report on the Company's website. While reading the report for his boss, Asher came across several terms about which he was unsure. He leaned around the wall of his cubicle and asked his colleague, Tessa, for help Asher Tessa, do you have a second to help me with my reading of Galaxy's annual report? I've come across several unfamiliar terms, and I want to make sure that I'm interpreting the data and management's comments correctly. For example, one of the footnotes to the financial statements uses "the book value of Galaxy's shares," and then in another place it uses "Economic Value Added." I've never encountered those terms before. Do you know what they're talking about? Tessa 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 the machine's historical cost and its accumulated depreciation expense is called its book value In contrast, when the term refers to the entire company, it means the total value of the as reported in the firm's Company's Asher 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 change in response to changes in the market prices of the firm's shares Tessa Right! So, how useful would a firm's book value be for assessing the performance of Galaxy's management
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