The book value of a firm is:
A) equivalent to the firm's market value provided that the firm has some fixed assets.
B) based on historical cost.
C) generally greater than the market value when fixed assets are included.
D) more of a financial than an accounting valuation.
E) adjusted to the market value whenever the market value exceeds the stated book valuE.

Question

Quizplus · Accepted Answer

The book value of a firm is based on historical cost, which is the cost at which the assets were originally purchased. It is not adjusted to reflect changes in market value, and may be different from market value depending on factors such as depreciation and changes in asset values over time.

The Book Value of a Firm Is