Which of the following could cause a firm's equity position to be weaker than is reflected in the balance sheet.
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A. B. C. D. E.C
Evaluating available-for-sale securities in a portfolio can be challenging to the analyst. A firm might hold a variety of securities in a portfolio for which the unrealized gains of one or more securities offsets the unrealized losses of other securities. While these values offset each other, the security that has an unrealized loss might be a high-grade investment that is not subject to much fluctuation. On the contrary, the securities that have unrealized gains might be highly volatile securities that were at all time highs at the close of the firm's fiscal period but will these gains be sustainable? It is conceivable then that the firm's equity position might be a bit weaker that the balance sheet suggests.