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

Contrast a benefit and a defined contribution pension plan, Compare and con...

Compare and contrast a defined benefit and a defined contribution pension plan. In defined benefit plan retirement remuneration are determined by a formula that typically

Calculate the new interest rate and excel function pv, Continuing growth of...

Continuing growth of the company has required that we issue the company''s corporate debt soon. As you know, in 6 months we plan to issue $10 million worth of 20-year corporate bon

Perpetual-floating rate bonds-index and linked bonds, Explain the following...

Explain the following term: Perpetual bonds, Floating rate bonds, Index-linked bonds and Callable bonds. Perpetual bonds (also termed as consols) are never mature. This

Approaches of the strategic human resource management, Approaches of the St...

Approaches of the Strategic human resource management (SHRM): 1. Attempts to the human linkage of some kind activities with competency based performance measures. 2. Attemp

Describe the internal control procedures, Board should encourage a strong c...

Board should encourage a strong control culture. Manager's bonus must not only be linked to company profits but also linked to internal control procedures being adhered to. There m

Show maximum opportunity cost, Q. Show Maximum opportunity cost? If Mar...

Q. Show Maximum opportunity cost? If Marton hedges all its awaited dollar income over the next year at US$1.55: £l this will make guaranteed (ignoring other sources of risk) st

Explain what happen when government imposes a minimum price, Explain what w...

Explain what will happen while the government imposes a minimum price that is below the market equilibrium price. Why is this true? The minimum price will comprise no impact on t

What is a security?, What is a security? The Securities are claims on f...

What is a security? The Securities are claims on financial assets.  They can be explained as "claim checks" that give their owners the right to obtain funds in the future.  Sec

Explain the concepts of planning the work, Explain the concepts of Planning...

Explain the concepts of Planning the work Determine scope and objective of the audit (to verify assets, to check adequacy of internal controls etc...). Ensuring appropr

Dividend payout ratio, Dividend Payout Ratio The percentage of earnings...

Dividend Payout Ratio The percentage of earnings or profit paid to shareholders in dividends. Computed as:   The payout ratio gives an idea about how well earning

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