Book and Market Values



Book and Market Values

Since financial statements are historical records, they represent what a company was at a point in the past. However, the value of a company's assets and liabilities are constantly changing in reaction to market changes, currency values, and management's decisions. Whereas asset discrepancies between book and market value can fluctuate dramatically, liability differences are usually smaller and less of a concern for the investor.

The most important factor in valuing a liability is the time until the liability ends. This maturity date is the aspect of liabilities most responsible for differences in book and market ...