Question

Which of the following is a primary reason a company's book value is less than its market value? a. Management recording errors. b. Many valuable resources of the company are not recorded as assets. c. Investors tend to be too optimistic about a company's growth opportunities. d. Land and buildings are valued at their fair value.

Answer 1

"Investors tend to be too optimistic about a company's growth opportunities" is a primary reason a company's book value is less than its market value.

Answer: Option C

Explanation:

Valuation describes the process in which it decides the current value of an object. Assessment on client assets and liabilities can be conducted Accurate estimation relies on the quality and availability of financial data about a given company.

A given organization's market value based on the previous performance of a business, and what shareholders expect. Expectations of investors can affect valuation and this can contribute to inflated prices when investors are predicting a company's growth prospects. However market value might not reflect a business' true worth, while the book value showcases a business' true value but it is usually lower than its market value.