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From: jmsellens@watdragon.UUCP
Newsgroups: can.politics
Subject: Re: market crash
Message-ID: <4155@watdragon.waterloo.edu>
Date: Tue, 17-Nov-87 18:33:15 EST
Article-I.D.: watdrago.4155
Posted: Tue Nov 17 18:33:15 1987
Date-Received: Thu, 19-Nov-87 03:24:28 EST
References: <11436@orchid.waterloo.edu> <1034@utflis.UUCP> <2191@lsuc.UUCP>
Reply-To: jmsellens@watdragon.waterloo.edu (John M. Sellens)
Distribution: can
Organization: U. of Waterloo, Ontario
Lines: 40

In article <2191@lsuc.UUCP> dave@lsuc.UUCP (David Sherman) writes:
>smithsco@flis.toronto.edu.UUCP (Scott Alan Smith) writes:
>>I thought that the value of the company - as it appears on its financial
>>statements and therefore to its bankers - was the book value which seldom
>>has any correlation to its market value.
>
>Book value is often used on financial statements, but it's
>rarely what the bankers will be interested in.  The prospects
>of a company as a going concern have little relationship to the
>book value of its assets.

But still you have people preferring to lease rather than buy,
because it "looks better on the financial statements" to those
people that don't know what they're looking at.  Unfortunately,
this group includes lots of bankers, lenders and investors.  Too
many people believe in the superficial appearances, without
looking at the real details.  Lease committments, for example,
are detailed in the notes to the financial statements, and a
prudent investor might lump those in with the liabilities when
trying to evaluate a company's debt position.

I think that someone (perhaps the Canadian Institute of Chartered
Accountants, though I don't recall for sure off the top of my head)
puts out a small book/booklet called something like "How to read
Financial Statements" that might be of interest to a beginning
investor.  (I could check the CICA publications list if anyone
is interested.)

>The "value" of anything is what it's worth -- what someone is
>willing to pay for it.  The stock market is the ultimate
>example of setting such a value "in the market".
But of course the stock market price tends to float "around" the
*real* value of the company, due to superstition and other weird
ideas. (Or so I think :-) )

John Sellens
sometime accountant and computer geek

(Hi Dave - yeah I'm still here, but I may eventually break down
and get a real job some day :-) )