Which one of the following statements is typically correct for a going-concern firm?
A) Book value of equity exceeds market value of equity.
B) Market value of equity exceeds book value of equity.
C) Book value of equity equals market value of equity.
D) No typical relationship exists between book and market values of equity.

Question

Quizplus · Accepted Answer

In a going-concern firm, the market value of equity is typically higher than the book value of equity because the market value reflects the expectations of future earnings and growth potential, which are not necessarily reflected in the book value.

Which One of the Following Statements Is Typically Correct for a Going-Concern