What Is the Main Problem in Using a Balance Sheet

Multiple Choice

What is the main problem in using a balance sheet to provide an accurate assessment of the value of a company's equity?

A) The balance sheet does not accurately represent the book value of assets held by the company.
B) The equity shown on the balance sheet does not reflect the market capitalisation of the company.
C) Knowing at a single point in time what assets a firm possesses and the liabilities a firm owes does not give any indication of what those assets can produce in the future.
D) Valuable assets such as the company's reputation, the quality of its work force, and the strength of its management are not captured on the balance sheet.