Which of the statements is true about the values recorded in the balance sheet of a firm?
A) The book values of a firm's assets will be equal to the market values of the firm's assets.
B) The book values of a firm's liabilities will be higher than the market values of the firm's liabilities.
C) The equity section of a firm's liability represents the difference between the market value of the firm's assets and the market value of the firm's liabilities.
D) The book values of a firm's assets will be higher than the market values of the firm's assets.
E) The book values of a firm's debt will be very close to the market values of the firm's liabilities.

Question

Quizplus · Accepted Answer

The book values of a firm's debt are often close to the market values of the firm's liabilities because debt is typically recorded at its face value, which is similar to its market value unless there are significant changes in interest rates or credit risk.

Which of the Statements Is True About the Values Recorded