CFA Practice Question

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CFA Practice Question

As an investor, how would you determine the total market value of a publicly traded corporation such as General Motors?

I. The values of debt and equity as they appear on the most recent financial statements.
II. The value of debt as it appears on the most recent financial statements plus the current market value of GM's common stock.
III. The current market value of GM's stock plus the market value of GM's debt.
Correct Answer: III only

User Contributed Comments 10

User Comment
vincenthuang in reality the mkt value of debt is almost equal to the book value of debt
Will1868 As mentioned in the notes book value is often used as a proxy for the market value
JP09 Yes, the market value of debt can be a major pain in to calculate especially if a firm has many different debt issues. And ultimately there is rarely a significant difference in the book value and market value of debt. Every Capital Budgeting course I have taken has assumed that Book Value of debt is sufficient. In theory though you would want the market value of both.
mattl31 GM's market value and book value differ significantly in today's market
sarath use the current market value always whenever possible,...
wordpower GM is bankrupt these days...
poomie83 I thought gm recently had the biggest stock issue in history
sungryongl why not I?
ana2 sungryongl, it is not I because it is not the current Mkt Value for both Debt and Equity.
Inaganti6 Disappointed John Tan had nothing to say
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