BUSI 530 DB2
Discussion Board 2
Managerial Finance
BUSI 530
Dr. C. Smith
Discussion Board 2
A company’s stock price along with its subsequent perceived valuation is influenced by several factors externally and internally. According to research, business valuation is defined as:
“A process and a set of procedures used to determine the economic value of an owner’s interest in a business. Business valuation is often used to estimate the selling price of a business, resolve disputes related to estate and gift taxation, divorce litigation, allocate business purchase price among the business assets, establish a formula for estimating the value of partners’ ownership interest for buy-sell agreements, and many other business and legal disputes.” (Financial News, 2014).
Factors Affecting Business Valuation
Profitability, income sources, cash flow along with liability and equity are some financial factors that affect the business valuation. Other factors such as competition, economic environments, industry’s outlook, internal regulations, market control, regulation, and intangible assets impact the company’s stock price. According to Hipshman (2011) the following factors are discussed below:
Competition. Competition depending on the competitors’ nature and amount plays a major role in affecting the value of a company.
Economic environment. Several economic conditions related to the status of financial conditions in a specific region during a specific period have a profound impact on the value of company. According to Investor Education Fund (2014), economical factors are interest rates, inflation, deflation, economic outlook, economic and political shocks, and changes in economic policy. Those factors also include expensive materials and accessibility of capital.
Industry outlook. Particular outlook on the industry’s economy, including the technological trends and chain of distribution, affects a business valuation.
Internal regulations. Management decisions and strategies,
Managerial Finance
BUSI 530
Dr. C. Smith
Discussion Board 2
A company’s stock price along with its subsequent perceived valuation is influenced by several factors externally and internally. According to research, business valuation is defined as:
“A process and a set of procedures used to determine the economic value of an owner’s interest in a business. Business valuation is often used to estimate the selling price of a business, resolve disputes related to estate and gift taxation, divorce litigation, allocate business purchase price among the business assets, establish a formula for estimating the value of partners’ ownership interest for buy-sell agreements, and many other business and legal disputes.” (Financial News, 2014).
Factors Affecting Business Valuation
Profitability, income sources, cash flow along with liability and equity are some financial factors that affect the business valuation. Other factors such as competition, economic environments, industry’s outlook, internal regulations, market control, regulation, and intangible assets impact the company’s stock price. According to Hipshman (2011) the following factors are discussed below:
Competition. Competition depending on the competitors’ nature and amount plays a major role in affecting the value of a company.
Economic environment. Several economic conditions related to the status of financial conditions in a specific region during a specific period have a profound impact on the value of company. According to Investor Education Fund (2014), economical factors are interest rates, inflation, deflation, economic outlook, economic and political shocks, and changes in economic policy. Those factors also include expensive materials and accessibility of capital.
Industry outlook. Particular outlook on the industry’s economy, including the technological trends and chain of distribution, affects a business valuation.
Internal regulations. Management decisions and strategies,