Sunday , November 24 2024
Home / Prime, Policy Research in Macroeconomics / The Wealth of Corporations: Why Firms Have Zero Net Worth, and Why It Matters

The Wealth of Corporations: Why Firms Have Zero Net Worth, and Why It Matters

Summary:
“Financial Assets = Liabilities.” It’s one of the great accounting-identity truisms of economic understanding — both among traditional, mainstream economists, and even (especially) among many heterodox, “accounting based” practitioners. It seems obvious: When a company issues and sells bonds, it posts a liability to its balance sheet; the bond buyers hold financial assets on theirs.[1] The problem is, that truism isn’t even close to true. The most obvious example is corporate equity shares — financial assets by any definition. The asset value of outstanding shares is vastly larger than firms’ book value, shareholders’ equity — the bottom-line balancing item on the liability side of firms’ balance sheets. Over the last half century, the market-to-book ratio of the S&P 500 has ranged

Topics:
Steve Roth & Sabri Öncü considers the following as important: ,

This could be interesting, too:

Ann Pettifor writes Global Economic Governance: What’s “Growth” Got to Do with It?

T. Sabri Öncü writes From Chile in 1973 to Argentina and Türkiye in 2023: Economic Genocide Continues

T. Sabri Öncü writes India’s Inclusion in the JP Morgan GBI-EM (bond) Indices

T. Sabri Öncü writes India’s Inclusion in the JP Morgan GBI-EM (bond) Indices

Leave a Reply

Your email address will not be published. Required fields are marked *