Explain the three financial factors that influence the value, Financial Management

Assignment Help:

List and explain the three financial factors that influence the value of a business.

The three factors that influence the value of a firm's stock price are timing, cash flow, and risk.

The Importance of Cash Flow:  In commerce, fund is what pays the invoice. It is as well what the firm receives in exchange for its services and products. Cash is thus of ultimate importance, and the prospect that the firm will generate funds in the future is one of the factors that gives the firm its value.

The Effect of Timing on Cash Flows:  Potential investors and Owners look at when firms can expect to receive funds and when they able to expect to pay out cash. All additional factors being equal, the earlier companies expect to receive cash and the later they expect to pay out cash, the further more valuable the firm and the higher its stock price will be.

The Influence of Risk:  Risk affects value for the reason that the less certain investors and owners are about a firm's expected future cash flows and the lower they will value the company. The more certain investors and owners are about a firm's expected future cash flows and the higher they will value the company. In short, the companies whose predictable future cash flows are uncertain will have lower values than companies whose predictable future cash flows are practically certain.

 


Related Discussions:- Explain the three financial factors that influence the value

Asset management ratios (turnover ratios), Asset management Ratios (Turnove...

Asset management Ratios (Turnover Ratios)   Receivables Turnover Ratio  It is a measure of receivables turnover.   Payables Turnover Ratio  It is a

How to solve problems, I need help solving problems for learning financial ...

I need help solving problems for learning financial management?

Capital gain or loss, An Investor can receive income from this ...

An Investor can receive income from this source when the bonds purchased at discount are held up to maturity or when he sells the bond before ma

Fiancial management, Ashok is to receive an amount of Rs. 15,00,000 from hi...

Ashok is to receive an amount of Rs. 15,00,000 from his relative after 3 years. He wants to buy a house for which he wants the money to be paid now. His relative had al

Yield volatility and measurement, Measuring volatility is very impo...

Measuring volatility is very important as it is a critical input in valuation models. In subsequent chapters we will see the importance of assumed volatilit

Financial issues of divestitures, FINANCIAL ISSUES OF DIVESTITURES Many...

FINANCIAL ISSUES OF DIVESTITURES Many corporations review the business portfolio to determine the operations that fit their core strategies. The firm's desire to achieve more f

Role of securities firms in investment intermediaries, What is the role of ...

What is the role of securities firms in investment intermediaries? Securities firms assist within the trading of existing securities into the secondary markets. The two major c

Accounting framework - convention of conservation, Accounting Framework - C...

Accounting Framework - Convention of Conservation Conservatism refers to the principle and practices that are established through way of tradition, reluctance to change from e

Explain the time value of money, What is the time value of money? The m...

What is the time value of money? The meaning of time value of money is that money you hold in your hand today is worth much more than money you suppose to receive in the future

Facts about mortgages, Lenders in the US insist upon ...

Lenders in the US insist upon some kind of mortgage insurance. There are broadly two types of mortgage insurance - one is

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd