metrics explained

market value of debt vs book value of debt: What's the Difference?

When it comes to valuing a company's debt, there are two common methods: market value of debt and book value of debt. So, what's the difference between the two?

Market value of debt takes into account the current market conditions and interest rates when valuing a company's debt. This method is typically used when a company is looking to refinance its debt.

Book value of debt, on the other hand, values a company's debt at its historical cost. This method is typically used for accounting purposes.

So, which method is better?

Well, it depends. If a company is looking to refinance its debt, then market value of debt is the more relevant method. However, if a company is simply trying to get an accurate picture of its financial situation, then book value of debt is the better method.

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