--%>
Assignment Help - homework help

Describe the three financial factors

List and described the three financial factors which influence the value of a business.

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

The Importance of Cash Flow:  In any business, cash is what pays the bills. This is also what the firm receives in exchange for its products & services. Therefore, Cash is of ultimate importance, and the expectation which the firm will generate cash in the future is one of the factors which gives the firm its value.

The Effect of Timing on Cash Flows:  Owners & potential investors look at while firms can assume to attain cash and while they can expect to pay out cash. All other factors being equivalent, the sooner companies expect to obtain cash and the later they expect to pay out cash, the more valuable the firm and the higher its stock price will be.

The Influence of Risk:  Risk affects value since the less certain owners & investors are about a firm's expected future cash flows, the lesser they will value the company. The more certain owners and investors are about a firm's expected future cash flows, the higher they will value the company. In brief, companies whose expected future cash flows are uncertain will have lower values than companies whose supposed future cash flows are almost certain.

 

   Related Questions in Finance Basics

  • Q : What is Statute Statute: It is a

    Statute: It is a written law enacted by the Legislature and signed by the Governor or a vetoed bill overridden by a 2/3 vote of both houses), generally referred to by its chapter number and the year in which it is passed. The statutes which modify a s

    		•
  • Q : What is the efficiency factor Normal 0

    Normal 0 false false

  • Q : Health finance 7.2 The audiology

    7.2 The audiology department at Randall Clinic offers many services to the clinic's patients. The three most common, along with cost and utilization data, are as follows: Service Variable Cost Annual Direct Annual # Visits per Service Fixed Costs Basic exam $5 $50,000 3,000 Advanced examination $7 $

    		•
  • Q : Can a corporation contain too much

    Can a corporation contain too much working capital? Describe. A firm can contain too much working capital if this is losing the chance to invest in high returning fixed assets and if this goes beyond the amount of working capital required for r

    		•
  • Q : Explain Modified Accrual Basis Modified

    Modified Accrual Basis: The base of accounting in which revenues are acknowledged when the underlying transaction has occurred as of the last day of the fiscal year and the quantity is measurable and accessible to finance expenditures

    		•
  • Q : What is Carryover Carryover : The

    Carryover: The unencumbered equilibrium of an appropriation which continues to be obtainable for expenditure in years following to the year of enactment. For illustration, when a three-year appropriation is not completely encumbered in the first year,

    		•
  • Q : Describe Section 28.00 Section 28.00 :

    Section 28.00: It is a Control Section of Budget Act which authorizes the Director of Finance to support the augmentation or diminution of items of expenditure for the receipt of un-anticipated federal funds or other non-state funds, and which identif

    		•
  • Q : Explain 3-year Expenditures and

    3-year Expenditures and Positions: The display at the beginning of each departmental budget which presents the different departmental programs by title, dollar totals, places, and source of funds for the past, current, and budget years.

    		•
  • Q : Examples of high operating leverage

    Give two instances of types of companies likely to contain high operating leverage. Give examples. Long distance telephone companies & electricity generating companies are likely to contain operating leverage. These two kinds of companies

    		•
  • Q : Explain Merger Merger : A merger takes

    Merger: A merger takes place whenever two companies unite to form a single company. This is very alike to an acquisition or takeover, apart from that the existing stock-holders of both companies comprised retain a shared interest in the latest corpora

    		•