Question

Explain why the total value of all of the securities used to finance a firm must be equal to the value of the firm.

Answer 1

Value of the firm is generally the all assets of the firm recorded in balance sheet and unrecorded in balance sheet like goodwill etc. So according to basic accounting equation assets must be equal to liabilities. So liabilities includes equity (including preferred retained earnings) and debt

So value must be the combined value of the equity and debt which will be equal to assets of the firm (recorded and unrecorded)

This value is often referred as enterprise value