Question

Assignment 03 - Financial Statements, Cash Flow, and Taxes Asha 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 company's as reported in the firm's Rafael 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 . Equally important, it change in response to changes in the market prices of the firm's shares. Asha Right So, how useful would a firm's book value be for assessing the performance of Atherton's management? Rafael Well, because Atherton's book value firm's shares, the firm's book value price of the firm's common stock and therefore performance with changes in the market price of the reflect management's efforts to maximize the be used to evaluate management's Now, what about "Economic Value Added"? Asha During the 1990s, the consulting firm Stern, Stewart & Company developed the concept of Economic Value Added, or EVA, to better assess management's performance in maximizing their shareholders' wealth

Answer 1

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Blank 1 : asset's historical value/original purchase price adjusted

Blank 2 The Net(diff between asset value and acc. depreciation) Value

Blank 3 Company's Stock holder equity as

Blank 4 the firm's Balance Sheet.

Blank 5 it is Historical value

Blank 6 the repurchase of

Blank 7 payment of dividends.

Blank 8 it will not change

Blank 9 book value does not change

Blank 10 book value cannot reflect

Blank 11 therefore should not be

Blank 12 Atherton's Annual dollar cost of capital from

Blank 13 its net operating profit after taxes

Blank 14 total investor applied operating

Blank 15 the greater/higher the

Blank 16 the greater/higher the

Blank 17 the greater/higher the