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11 the balance sheet amount of shareholders equity does not and is not intended to p 4297554



11. The balance sheet amount of shareholders’ equity does not, and is not intended to, provide the user of the financial reports with a measure of the market value of common equity. 

12. A potential investor can easily ascertain market value of common equity for a given publicly traded firm by looking up the most recent share price (as reported in various online services) and then multiplying this share price times the number of common shares outstanding, as reported on the balance sheet. 

13. One can analyze the financial health of a business from a single financial statement considered in isolation such as the balance sheet. 

14. Many analysts use a common-size balance sheet, which expresses each balance sheet item as a percentage of total assets. 

15. The balance sheet portrays the effects of a firm’s investing and financing decisions. 

16. Operating risk arises from the asset side of the business, and financing risk arises from debt. 

17. The balance sheet does provides all the information an analyst wants or needs about a firm’s resources and the claims on those resources. 

18. Authoritative accounting guidance precludes the recognition of some resources as assets and some obligations as liabilities. 

19. The amounts reported on the balance sheet for assets, liabilities, and shareholders’ equity reflect current market conditions. 

20. In assessing the financial condition of a firm, an astute analyst recognizes that historical costs are reflected on the balance sheet and adjusts the reported numbers. 


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