Shareholders’ equity reported on the balance sheet is most likely to differ from
the market value of shareholders’ equity because:
A historical cost basis is used for all assets and liabilities.
B some factors that affect the generation of future cash flows are excluded.
C shareholders’ equity reported on the balance sheet is updated continuously
FRA
Share
Answer will be Option B.
Balance sheet does not include certain items which can generate cash flows for business. For example business’s reputation, skills of the management etc are not there in the balance but these have the potential to generate cash flows.