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Valuation of a company

Several factors, both internal and external, impact a company's stock price, and the subsequent perceived valuation of a company. Sometimes that perceived value matches that of the financial statements, and other times it is vastly different.

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.

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Stocks trade on perceived value created by a host of external and internal environment factors surrounding the organization. Let us discuss these factors one by one.

One of the most important factors that affects the perceived value of a stock is positive or negative news that is perceived to create a positive or negative impact on the earnings of the organization. In order to understand this in a better manner, let us take the case of a pharmaceutical company which is expected to receive FDA approval for a potential blockbuster drug. The company's stock price will show a strong rise due to the perceived growth potential of the company due to this new ...

Solution Summary

Discusses the factors that lead to a valuation of a company's worth compared to that of the financial statements.

$2.19