Why Do We Use Market-Value Weights Instead of Book-Value Weights

question 58

Multiple Choice

Why do we use market-value weights instead of book-value weights?

• A)Because firms often "window-dress" their financial statements.
• B)Because we are interested in determining what the cost of financing the firm's assets would be given today's market situation and the component costs the firm currently faces, not what the historical prices would have been.
• C)Because it is required in the Sarbanes-Oxley regulations.
• D)None of these answers is correct.

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Definitions:

Middle Ear

Of the mammalian ear, region that contains the eardrum and the tiny bones that transfer sound to the inner ear.

Tiny Bones

Small skeletal elements, often found in the ear, that contribute to functions such as hearing and balance.

Functionally Connected

Term describing parts of a system that work together to perform a particular function.

Malleus

A small bone in the middle ear that transmits sound vibrations from the eardrum to the inner ear, also known as the hammer.