Difference between the book value and market value

Reference no: EM1373174

We discussed cash flow in DQ1. Another measure of value is the firm's assets less liabilities or investor's equity. We call this book value of the firm. However the actual fair market value of the firm's assets and liabilities can be far different than the book value which has important implications for valuing a firm. Go to the Internet and compute UPS and FDX book value or also known as shareholder's equity. Then compute the market value of the company through

· Why is there a difference between the book value and market value? After all if you buy all the stock aren't you simply buying the total assets and assuming the total liabilities of the company?

· Now divide the market value you obtained by the book value to get the ratio. We often call this the firm's multiple of book value. What if anything does the difference in ratio between the two firms indicate about the relative strength of your two firms?

Reference no: EM1373174

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