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Sir, when we are calculating the total market value of a company do we include the bank loans? If so will its market value be the same as its book value? I believe we won’t need to include the reserves as they are included in the share price, right?
Yes to the bank loans (for the same reasons as I have explained in my answer to your other post).
And yes, we add reserves to the market value of shares for the reason you state (and as I explain in my lectures). We only add reserves if we are calculating the gearing based on book values, which we only do if specifically told to (because it doesn’t really mean much using book values).Okay, and we don’t include overdrafts in the total market value of a company unless they are intended to continue in the long term?
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