Computation of weights or proportions, Finance Basics

Computation of Weights or Proportions

In computation of the weights or proportions of different capital components, the following values might be used like as:

  1. Market values
  2. Replacement values
  3. Book values
  4. Intrinsic values

Market Value - This includes determining the weights or proportions using the recent market values of the various capital components. The problems along with the use of market values are as:

The market value of each security remains on changing on daily basis therefore market values can be computed simply at one point in time.

The market value of each security may be incorrect because of cases of over or under valuation in the market.

Book values - This involves the utilization of the par value of capital as shown in the balance sheet. The main problem with book values is such they are historical/past values showing the value of a security when in the market for the first time it was originally sold.

Replacement values - This contains determining the weights or proportions on the origin of amount such can be paid to replace the existing assets. The problem along with replacement values is such can assets never be replaced at ago and replacement values may not be determined objectively.

Intrinsic values - In this case the weights are determine on the basis of the real/intrinsic value of a given security. Intrinsic values may not be accurate since they are computed using historical/past information and are generally estimates.

Posted Date: 1/30/2013 4:36:38 AM | Location : United States







Related Discussions:- Computation of weights or proportions, Assignment Help, Ask Question on Computation of weights or proportions, Get Answer, Expert's Help, Computation of weights or proportions Discussions

Write discussion on Computation of weights or proportions
Your posts are moderated
Related Questions
Financial management is very important for any organization as at the end what does matter is the money. An effective financial management is of high importance for ensuring the be

The Bayview Investment Partners owns an office building near Shoal Creek and Anderson lane in suburban Dallas. The building is ten years old. Bayview is willing to sell the propert

Illustrate the Advantages of Underwriting Underwriting presumes great significance as it offers the below benefits to the issuing company: (i) Issuing company is relied f

FASB Assignment

Stewardship Accounting Shareholders contribute capital that is provided to the directors that they employ and at the end of each accounting year render an explanation on the a

Please describe the trade-off theory of capital structure and how it vary from the Modigliani and Miller theorem with taxes.

Obtain a copy of a Comprehensive Annual Financial Report (CAFR) for a state or local government for which you would have an interest. Answer the following questions regarding that

Suggestion regarding Credit limit. Should it be approved or not, what should be the amount of credit limit that electronics give to Booth Plastics.


Significant Features of Partnership 1) The capital is contributed by the partners and no appeal is made to the public. 2) Like the sole proprietorship, a partnership has a l