{"id":1267,"date":"2024-04-17T18:52:19","date_gmt":"2024-04-17T18:52:19","guid":{"rendered":"https:\/\/eoninvestment.com\/?p=1267"},"modified":"2025-02-09T11:50:55","modified_gmt":"2025-02-09T07:50:55","slug":"economic-balance","status":"publish","type":"post","link":"https:\/\/eoninvestment.com\/ka\/2024\/04\/17\/economic-balance\/","title":{"rendered":"Economic Balance"},"content":{"rendered":"\n

This is an Economic Balance Sheet<\/strong>, which differs from a traditional accounting balance sheet by focusing on economic values<\/strong> rather than book values. It presents the firm’s total value from two perspectives:<\/p>\n\n\n\n

    \n
  1. Resources\/Assets Side (Sources of Value)<\/strong>\n
      \n
    • The value of the unlevered business operations<\/strong> ($13,000) represents the firm’s value if it had no debt and only included core operations.<\/li>\n\n\n\n
    • The value of excess assets<\/strong> ($3,000) includes non-core assets such as cash reserves or other holdings not essential to operations.<\/li>\n\n\n\n
    • The value of the unlevered firm<\/strong> ($16,000) is the sum of core business operations and excess assets.<\/li>\n\n\n\n
    • The value created from financing<\/strong> ($3,800) represents the additional value generated by using leverage (PV of Tax Shield).<\/li>\n\n\n\n
    • The total firm value<\/strong> ($19,800) is the sum of the unlevered firm value and financing benefits.<\/li>\n<\/ul>\n<\/li>\n\n\n\n
    • Claims on Resources (Sources of Financing)<\/strong>\n
        \n
      • The firm’s total value is funded by debt<\/strong> ($5,304) and equity<\/strong> ($14,496).<\/li>\n\n\n\n
      • The sum of debt and equity<\/strong> ($19,800) matches the total firm value, ensuring the balance sheet remains balanced.<\/li>\n<\/ul>\n<\/li>\n<\/ol>\n\n\n\n

        \"\"\/<\/p>\n\n\n\n

        Corporate Valuation Theory, Evidence and Practice – by M. E. Zmijewski; R. W. Holthausen<\/p>\n","protected":false},"excerpt":{"rendered":"

        This is an Economic Balance Sheet, which differs from a traditional accounting balance sheet by focusing on economic values rather than book values. It presents the firm’s total value from two perspectives: Corporate Valuation Theory, Evidence and Practice – by M. E. Zmijewski; R. W. Holthausen<\/p>\n","protected":false},"author":12998525,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"image","meta":{"_coblocks_attr":"","_coblocks_dimensions":"","_coblocks_responsive_height":"","_coblocks_accordion_ie_support":"","_crdt_document":"","advanced_seo_description":"","jetpack_seo_html_title":"","jetpack_seo_noindex":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"jetpack_post_was_ever_published":false},"categories":[774675951,14472570],"tags":[724115,4269,6635,28559,37820],"class_list":["post-1267","post","type-post","status-publish","format-image","hentry","category-corporate-valuation-theory-evidence-and-practice-by-m-e-zmijewski-r-w-holthausen","category-dcf-valuation","tag-dcf","tag-finance","tag-investing","tag-investment","tag-valuation","post_format-post-format-image","has-post-thumbnail","fallback-thumbnail"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_likes_enabled":true,"jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/pQZ85-kr","_links":{"self":[{"href":"https:\/\/eoninvestment.com\/ka\/wp-json\/wp\/v2\/posts\/1267","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/eoninvestment.com\/ka\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/eoninvestment.com\/ka\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/eoninvestment.com\/ka\/wp-json\/wp\/v2\/users\/12998525"}],"replies":[{"embeddable":true,"href":"https:\/\/eoninvestment.com\/ka\/wp-json\/wp\/v2\/comments?post=1267"}],"version-history":[{"count":7,"href":"https:\/\/eoninvestment.com\/ka\/wp-json\/wp\/v2\/posts\/1267\/revisions"}],"predecessor-version":[{"id":6095,"href":"https:\/\/eoninvestment.com\/ka\/wp-json\/wp\/v2\/posts\/1267\/revisions\/6095"}],"wp:attachment":[{"href":"https:\/\/eoninvestment.com\/ka\/wp-json\/wp\/v2\/media?parent=1267"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/eoninvestment.com\/ka\/wp-json\/wp\/v2\/categories?post=1267"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/eoninvestment.com\/ka\/wp-json\/wp\/v2\/tags?post=1267"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}