Creating Value: Internal and External Factors

1257 Words Apr 5th, 2015 6 Pages
Discussion Board 2: Valuation
Charles E. Sullins, Jr.
Managerial Finance – BUSI 530_B10
Liberty University

INTRODUCTION
The purpose of this thread is to discuss the factors that lead to a valuation of a company’s worth compared to that of the financial statements, and how company executives create the most value for all stakeholders. Value is formed by different internal and external factors. This discussion will examine some of these factors in an effort to determine how a company’s worth is measured. This discussion will also include views from a faith-based standpoint and how human success must glorify God. “Love not the world, neither the thingsthat are in the world. If any man love the world, the
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When this is the case, it's usually because the market has lost confidence in the ability of the company's assets to generate future profits and cash flows. In other words, the market doesn't believe that the company is worth the value on its books. Value investors often like to seek out companies in this category in hopes that the market perception turns out to be incorrect. After all, the market is giving you the opportunity to buy a business for less than it’s stated net worth.
1. Market Value Greater Than Book Value: The market assigns a higher value to the company due to the earnings power of the company's assets. Nearly all consistently profitable companies will have market values greater than book values.
2. Book Value Equals Market Value: The market sees no compelling reason to believe the company's assets are better or worse than what is stated on the balance sheet” (para. 6).
CREATING VALUE FOR SHAREHOLDERS Executives play a major role in creating value for stakeholders. Creating value for stakeholders is the primary role of an executive. The first thing executives must do is build trust. This element is essential to all positive aspects of value. Gaining trust is accomplished through strong work ethic, sound values, accountability, and leading by example. Not only will this develop strong working relationships, it will also aid in ushering in the next generation of managers. It will help gain confidence in the financial markets as

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