“fair value” of financial asset

1.Why the so-called “fair value” of financial asset is represented by the present value of future cash flows of financial asset? 2.Provide the common size statements for both Balance Sheet and Income Statement. What kind of noticeable pattern you may identify for the firm? Is this usual for the airline industry? Balance Sheet (in millions)                                                                        2012               2013                2014AssetsCash                                                                  30                  10                         475Marketable securities                                        150                100                    0Accounts Receivable                                         920            1150                  800Inventory                                                          760                278                450Plant, Building, and Equipment’s (net)          1872                1905                1109Investments in affiliates                                     0                          30                          329  Total Assets                                                  3732                3473                3163Liabilities Short-term debts                                             607                      9                          30Advances from customers                            111                    34                            34Accounts payable                                           685                  192                773Interest payable                                            75                  98                            62Tax payable                                                    127                  147                128Other Accrued Expenses                              20                  15                            35Bonds payable                                                925                  486                650Stockholders’ EquityCommon stock                                               1021                2258                1175Additional paid-in capital                              74                          156                147        Retained earning                                                 87                           78                          129Total liabilities and equities                           3732                3473                3163Income Statement(in millions)                                                                        2012               2013                2014Net Sales                                                         3296                3418                3983Cost of Goods Sold                                        2215                1809                2410Selling and General Expenses                            700                812                759Depreciation Expense                                       260                298                284 Interest Expense                                                 90                          109                121  Income Tax Expense                                           295                        137                254Net Income                                                       (264)                        253                155

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