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

Capital asset pricing model, Can you draw Capital asset pricing model with ...

Can you draw Capital asset pricing model with example and explain?????

Viability of project - syringe management, The syringe management program t...

The syringe management program tries to educate society by increasing the capacity and quantity of the syringe disposable centers , providing timely responses to all syringe compla

Difference euronote market and euro medium term note market, What is the di...

What is the difference between the Euronote market, the Euro-medium-term-note market, and the Eurocommercial paper market? Answer:  Euronotes are short-term notes guarantees by

Incorporation of the risk in investment proposal, Q. Incorporation of the R...

Q. Incorporation of the Risk in Investment Proposal? Incorporation of the Risk in Investment Proposal: - As stated previous risk is involved in every capital budgeting decision

What is over capitalization, Accounting and Financial Management 1. Wha...

Accounting and Financial Management 1. What is over capitalization? How do we know over capitalization has occurred? 2. Explain permanent and temporary working capital. 3

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

Evaluate the critical path, a) Definitions of EST and LFT needed in order t...

a) Definitions of EST and LFT needed in order to explain the differentiation between the terms. The EST of each activity will depend on the LFT of all preceding activities. b) S

Wcr expense ratios, Scenario:  ABC Company sells widgets in three varietie...

Scenario:  ABC Company sells widgets in three varieties (blue, red, and yellow) but has lost money for the past three years.  Competitive intelligence shows the Company's products

Explain significance of the additional funds needed (afn), Explain the sign...

Explain the significance of the term additional funds needed. While the pro forma balance sheet is completed, total assets and total liabilities and equity will hardly match.

Define the concept of a real option, Define the concept of a real option. D...

Define the concept of a real option. Discuss some real options a firm can be confronted with when investing in real projects. A positive APV project is accepted under the supposi

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