The equity on the balance sheet is known as the company's book value. The book value of the company is different than a company's market value (...

The equity on the balance sheet is known as the company's book value. The book value of the company is different than a company's market value (market capitalization or market cap). The market value of a company is determined by multiplying the company's number of shares of common stock outstanding by the company's stock price. Presently for U.S. companies, median book value is about one-half of market value, yielding a 2.0 market-to-book ratio. This means that the market draws on additional information than that provided in the company's financial statements in valuing companies' stock.

List two different reasons as to how the application of Generally Accepted Accounting Principles (GAAP) in financial statement preparation can cause a difference between a company's book value and their market value.