Book value:
A) is equivalent to market value for firms with fixed assets.
B) is based on historical cost.
C) generally tends to exceed market value when fixed assets are included.
D) is more of a financial than an accounting valuation.
E) is adjusted to market value whenever the market value exceeds the stated book valuE.

Question

Quizplus · Accepted Answer

Book value is based on historical cost, meaning the amount the asset was initially acquired for, less any accumulated depreciation or amortization. It is not equivalent to market value, and may not reflect the actual current value of an asset. Book value tends to be lower than market value when fixed assets are included, as market value may reflect factors such as changes in demand or inflation that are not considered in historical cost. Book value is a valuation method commonly used in accounting, rather than purely financial analysis. There is no need to adjust book value to market value, as they are distinct concepts.

Book Value