Class Notes (838,337)
Canada (510,861)
Accounting (91)
ACCT 301 (31)
All (31)

chapter 21.docx

2 Pages
Unlock Document

ACCT 301
All Professors

Chapter 21 Breakup Valuation is based on the forced sale of individual assets in the second hand market. Basically, the current values of all assets are added up together. The Advantages 1. It represents the minimum value at which the company can be sold 2. If company ignores breakup value, an opportunity exists for asset-strippers 3. An indication of the min amount of capital that could be obtained for investment elsewhere. The Disadvantages 1. Ignores that the company is a going-concern 2. Values on assets are estimates 3. Sale value of fixed assets is hard to ascertain. Book Value: Original Share Capital + Reserves the Advantages 1. The figures are factual as they are based on historical cost 2. They are easily obtainable 3. The figures for debtors and non-equity liabilities are accurately reflected. The Disadvantages 1. Inflation means that historical cost is not an accurate measure of current value 2. Historical costs aren't very accurate due to inaccurate measures of depreciation. 3. The book value of stock is unlikely to reflect its current value, because market values often include an element of profit. 4. Ignores the existence of intangible assets such as goodwill. Replacement Cost: Replacement Cost of Assets less: All Liabilities The Advantages Assets are valued at their replacement cost! The Disadvantages 1. T
More Less

Related notes for ACCT 301

Log In


Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.