Which of the following best explains why market prices are useful to a financial manager?
William Jenkins
Updated on January 05, 2026
Which of the following best explains why market prices are useful to a financial manager when performing a cost benefit analysis? They can be used to convert different services and commodities into equivalent cash values which can be compared.
How do financial managers use the valuation principle?
Valuation often relies on fundamental analysis (of financial statements) of the project, business, or firm, using tools such as discounted cash flow or net present value. Valuation is used to determine the price financial market participants are willing to pay or receive to buy or sell a business.
What is the valuation principle?
Valuation principle. -The value of a commodity or an asset to the firm or its investors is determined by its competitive market price. -When the value of the benefits exceeds the value of the costs, the decision will increase the market value of the firm.
What is bond in stock?
A bond is a fixed income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental). Bonds are used by companies, municipalities, states, and sovereign governments to finance projects and operations. Owners of bonds are debtholders, or creditors, of the issuer.
What are the effects of having a financial manager?
Technological improvements have made it easier to produce financial reports, and, as a consequence, financial managers now perform more data analysis that allows them to offer senior managers profit-maximizing ideas. They often work on teams, acting as business advisors to top management.
How is a valuation calculated?
Market capitalization is the simplest method of business valuation. It is calculated by multiplying the company’s share price by its total number of shares outstanding.
What is difference between bond and share?
Shares are part-ownership in a company, bonds are IOUs Simply put, when an investor buys shares they are buying part of a company; when they buy bonds, they are lending money to a company.
