Not one of the financial statements will show a corporation’s worth. The balance sheet, income statement, statement of cash flows, and stockholders’ equity statement merely provide information to assist financial experts in forming an opinion of a corporation’s worth.
In the past, some people mistakenly thought that a corporation’s stockholders’ equity was the corporation’s worth. However, stockholders’ equity (or the owner’s equity of a proprietorship) is merely the result of subtracting the reported amount of liabilities from the reported amount of assets. Since the reported amounts reflect the cost principle and other accounting principles, the net result cannot be assumed to be the company’s worth.
