59 ChatGPT4.0 Flashcards
What does carrying value of an asset mean?
The carrying value of an asset, also known as book value, is the value of an asset as it appears on a balance sheet. It is calculated by taking the original cost of the asset and subtracting any accumulated depreciation, amortization, or impairment costs that have been applied over time. The carrying value reflects the accounted cost of an asset in a company’s financial records, rather than its current market value or resale price. It’s a measure used to assess the value of assets that a company owns and reports in its financial statements. Over time, as an asset is used and ages, its carrying value decreases to reflect wear, obsolescence, or market conditions, unless it’s an asset that potentially appreciates in value.
Is buying treasury stock an operating activity, financing or investing?
Buying treasury stock is considered a financing activity rather than an operating or investing activity.
Financing activities are transactions that involve the company’s financing structure, including interactions with shareholders and creditors. Buying back treasury stock involves using funds to repurchase shares of the company’s own stock from the open market or from shareholders. This reduces the number of outstanding shares, which can potentially increase earnings per share and return value to shareholders.
Operating activities involve the day-to-day activities of the company, such as revenue generation, production, and expenses.
Investing activities involve the purchase and sale of long-term assets, such as property, plant, and equipment, as well as investments in securities not classified as cash equivalents. Buying treasury stock does not fall into either of these categories.
