What are the factors that lead to a valuation of a company's worth compared to that of the financial statements? How do company executives create the most value for all stakeholders?
Before talking about factors, let's determine the relationship of the financial information:
Remember that a firm acquires assets for 2 primary reasons: one is that they contribute to sales; second is that they can help maintain and/or reduce costs. If they do not do one or the other of these things, then they should not be acquired and reported on the balance sheet.
The second observation is that long-term assets lead to and/or create investment opportunities, which either lead to increased sales (company growth), or lead to reducing expenses in relation to sales growth, or both.
Couple the above with the fact that the firm now has the ability to increase sales while maintaining and/or reducing expenses and ...
Executives are responsible for increasing the value of the firm, and the return to shareholders. In addition, firms have a responsibility to their stakeholders to create value and to enhance the sustainability of the company. This discussion reveals steps necessary to accomplish these goals, as well as to become responsible community citizens.