COM 371 Study Guide - Midterm Guide: Credit Rating Agency, Net Income, Preferred Stock
10 Jan 2019
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Book value of assets is not necessarily equal their market value (especially, for old assets) Market value represents the cash price people are willing and able to pay. Irrelevance of book (historical cost) value and importance of market value for decision making. Accounting income is the net profit of the firm obtained using gaap and accounting depreciation. Taxable income, or income for tax purposes is the net profit of the firm arrived at using gaap and cca in accordance with the income tax act. Economic income is the amount of funds a firm could withdraw from the firm at the end of an accounting period, and leave the firm in the same income earning position as it started the period. Generally: accounting income > taxable income > economic income. Accounting income is usually greater than income for tax because the cca deductions are usually greater than accounting depreciation.
