Explain about book value weights, Financial Management

Assignment Help:

Q. Explain about Book Value Weights?

Book Value Weights: - Book value weights are calculating form the values taken from the balance sheet. The weight to be assigned to every source of finance is the book value of that source of finance divided by the book value of total sources of finance.

Benefits of Book Value Weights:

  • Book values are readily obtainable from the published records pf the firm.
  • Book value weights are more realistic for the reason that the firms set their capital structure targets in terms of book values rather than market values.
  • Book value weights aren't affected by the fluctuations in the capital market.
  • In the circumstances of those companies whose securities aren't listed only book value weights can be used.

Drawbacks of Book Value Weights:-

  • The costs of different sources of finance are calculated using prevailing market prices. Hence weights must also be assigned according to market values.
  • The present economic values of different sources of capital may be totally different from their book values.

Related Discussions:- Explain about book value weights

Why do we focus on cash flows instead of profits, Why do we focus on cash f...

Why do we focus on cash flows instead of profits when evaluating proposed capital budgeting projects? We focus on cash flows at the place of profits when evaluating proposed ca

Define financial management, Financial management is that division of manag...

Financial management is that division of managerial process which is concerned with the planning and controlling of firm's financial resources. It is concerned with the procurement

Investor invest lion’s share of fund in domestic securities, Why do investo...

Why do investors invest the lion’s share of their funds in domestic securities? Answer: Investors invest greatly in their domestic securities since there are major barriers to in

Objectives of financial services authority, Objectives of financial service...

Objectives of financial services authority FSMA provides four statutory objectives to FSA. They are: Market Confidence: Maintaining confidence in the financial system;

Dividend policy, the managing directors of three profitable listed companie...

the managing directors of three profitable listed companies discussed their company''''s dividend policies. company A has deliberately paid no dividends for the past five years. co

Define how earnings available to common stockholders, Define how earnings a...

Define how earnings available to common stockholders and common stock dividends paid from the current income statement influence the balance sheet item retained earnings. The a

Gordan model, A company has a total investment of Rs 500,000 in assets, and...

A company has a total investment of Rs 500,000 in assets, and 50,000 outstanding ordinary shares at Rs 10 per share (par value). It earns a rate of 15 per cent on its investment, a

Differentiate between systematic and unsystematic risk, QUESTION a) Dis...

QUESTION a) Discuss the importance of diversification in the context of stock markets using appropriate numerical illustrations. b) Mimine and Minush are two companies with

Difference between pay-as-you-use and pay-as-you-go methods, Question 1: ...

Question 1: (a) Explain fully the difference between ‘Pay-As-You-Use' and ‘Pay-As-You-Go' methods of financing infra-structural projects. (b) Write short notes on any ONE of

Features of capital budgeting decisions, Features of Capital Budgeting Deci...

Features of Capital Budgeting Decisions 1.       Existence of potentially large anticipated profits. 2.       Involves a comparatively high degree of risk 3.       Exist

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd