Describe market value weights, Financial Management

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Q. Describe Market Value Weights?

Market Value Weights: - As per market worth scheme of weighting the weights to dissimilar sources of finance are assigned on the basis of their market values.

Benefits of Market Value Weights:-

The costs of different sources of finance are calculated using prevailing market prices. Therefore it is proper to use market value weights
Weights assigned as-per to the market values of the sources of finance represent the true economic values of different sources of finance.

Drawbacks of Market Value Weights:-

Market value weights mayn't be available as securities of all the companies aren't actively traded.
It is extremely difficult to use market value weights for the reason that the market prices of securities fluctuate widely and frequently.

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