HTA 602 Lecture Notes - Lecture 2: Tax Shield, Historical Cost, Book Value
Document Summary
The statement of financial position is a snapshot of the firm"s assets and liabilities at a given point in time. Assets are listed in order of liquidity. Positive when the cash that will be received over the next 12 months exceeds the cash that will be paid out. Ability to convert to cash quickly without a significant loss in value. Liquid firms are less likely to experience financial distress. However, liquid assets earn a lower return. The statement of financial position provides the book value of the assets, liabilities and equity. Market value is the price at which the assets, liabilities or equity can actually be bought or sold. Market value and book value are often very different. Ifrs allows companies to use the historical cost method. Also allows use of the revaluation (fair value) method. All items in an asset class should be revalued simultaneously.