Which of the Following Accurately Describes the Relation Between Book

question 235

Multiple Choice

Which of the following accurately describes the relation between book and market value?

• A) Financial managers should rely on book values, and not market values, when making decisions for the firm, because the firm's tax liability is based on book values.
• B) Financial managers should rely on market values, and not book values, when making decisions for the firm, because the firm's tax liability is based on market values.
• C) Book value is an accounting summary of value and is inferior to market value as a source of current information regarding the true value of the firm.
• D) The market value of current assets is often difficult to determine, and thus of little value to the decision making process of financial managers.
• E) Market value always exceeds book value.

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