A relative (who does not have a background in accounting) is trying to understand the finances of the company that she has recently been employed by. She has looked at the most recent Statement of Financial Position and has seen that the property the company owns and uses on an industrial trading estate is included in the financial statements at £1,400,000, but similar units on the same estate are currently being offered for sale at a price of £2,150,000. The total value of net assets (and shareholders' funds) in the balance sheet is £5,780,000, but the company has a total of 10 million shares in issue and these are trading at a price of £0.98p. Explain what information is contained in the statement of financial position and why this may be different from the market value of assets and the company's market capitalization.

Answer rating: 100% (QA)

SOLUTION COST CONCEPT OR HISTORICAL COST PRINCIPLE According to this principle assets must be record... View the full answer