Question: Please help me answer this question. Thank you so much!! Q1. (Fair Value and Financial Statements) If a firm A invests in an asset, its

Please help me answer this question. Thank you so much!! Q1.

Please help me answer this question. Thank you so much!!

Q1. (Fair Value and Financial Statements) If a firm A invests in an asset, its value will be recorded in its balance sheet. If the value of a real estate or a plant is $XXX, it will increase the debit and credit by $XXX. Suppose that A makes a financial contract that is based on a fair value (the buyer and the seller values the contract equally). Therefore, the estimated value of the contract is (nearly) zero and it will not change the A's balance sheet. Suppose there is very similar firm B without such contracts. Which firm do you think is riskier in terms of its cash flows? As a potential investor do you think you can get enough information from As balance sheet

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