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

Which ratios is potential long term bond investor, Which ratios would a pot...

Which ratios would a potential long-term bond investor be most interested in? Explain. Potential and Current lenders of long-term funds, like banks and bondholders, are interest

Calculate the expected return and standard deviation, Benjamin Tang current...

Benjamin Tang currently has holdings in the following three companies:                                                                             E(R)                      σ

Prices and yields, Prices and Yields The face value of the government s...

Prices and Yields The face value of the government security is Rs.100 or Rs.1,000. Earlier, that is, before 1950s the government bonds were issued at a discount. There was no f

What do you mean by pension funds, What do you mean by pension funds? ...

What do you mean by pension funds? Pension funds: Pension funds give retirement income (as the form of annuities) to workers covered through a pension plan. They get cont

What is rationale and behind profitability maximisation, What is Rationale ...

What is Rationale and behind profitability maximisation Rationale & behind profitability maximisation, as a guide to financial decision making, is simple. Profit is a test of e

Explain the costs and benefits of being a remote island, Problem: 1.1 C...

Problem: 1.1 Clearly explain the costs and benefits of being a small and remote island or a ministate economy. 1.2 Over the years, the role of government has been defined al

Design a digital option as a sequence of calls, An individual agent thinks ...

An individual agent thinks that there is a high probability that the Dow Jones will have a payoff (or points) between a=10000 and b=12000 at t=1. Design a digital option (see Fi

Expalin the term mutual funds, Mutual funds Mutual funds pool resources...

Mutual funds Mutual funds pool resources from a lot of individuals and companies and invest these resources in diversified portfolios of bonds, stocks and money market instrume

Depreciation, calculation of depreciation of long lived assets in times of ...

calculation of depreciation of long lived assets in times of inflation

Bankers acceptance, Bankers' acceptance is a debt instrument created ...

Bankers' acceptance is a debt instrument created to smoothen the commercial trade transactions. It is named so because a banker in this case accepts the ultimate

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