Sir I want to ask 2 question related to NN co dec 2010 question.
1) Here in calculation of equity value by NAV method, why they have deducted preference share capital ? Here pref share capital is not shown in non current liabilities, here they have shown it in equity in B/S , so it should not be deducted na?
2) In calculation of equity value by NAV method, why they have used book values instead of market values for long term loan & pref share capital?
1. This is not a financial accounts exam, and so regardless of how the SOFP is set out, when asked to value equity it always relates just to ordinary shares.
2. There is no choice but to use book values, because we only know the book values of the assets. Better in practice would be to use market values – then we would use market value of the assets and market value of the loan and preference shares – but it would make no sense to use books values of the assets and market values of the liabilities.
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