At Acquisition Date,the Cost Price and Fair Value of an Asset

question 5

Multiple Choice

At acquisition date,the cost price and fair value of an asset will be fairly equivalent.However,over the life of the asset,the:

• A) fair value will always be greater than the cost price.
• B) cost price will always be greater than the fair value.
• C) fair value and cost price will most likely diverge.
• D) fair value and cost price will remain fairly equivalent.

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Definitions:

Vertical Analysis

A financial analysis method that expresses each item in a financial statement as a percentage of a base amount to compare different years or companies.

Cost of Goods Sold

The immediate costs involved in making the products that a company sells, comprising both materials and labor.

Net Sales

The revenue generated from sales after deducting returns, allowances for damaged or missing goods, and discounts.

Liquidity Ratio

A financial metric used to determine a company's ability to pay off its short-term debts obligations with its liquid assets.