Which of the following best explains why market prices are useful to a financial manager when performing a cost-benefit analysis?
A) They can be used to determine how much an asset can be sold for.
B) They can be used to convert different services and commodities into equivalent cash values which can be compared.
C) They allow all commodities and services to be assigned a fixed and unchanging value.
D) They can be evaluated to determine whether the market in which the manager exchanges goods and services offers true value.

Question

Quizplus · Accepted Answer

Market prices provide a common currency (cash value) that financial managers can use to compare the costs and benefits of different commodities and services. This is useful when making decisions about investments, financing, or pricing strategies. They can also be used to estimate the resale value of assets. However, market prices are not fixed or unchanging and may not always reflect the true or fair value of goods and services. Therefore, financial managers need to consider other factors such as supply and demand, competition, and market trends when using market prices in cost-benefit analysis.

Which of the Following Best Explains Why Market Prices Are