--%>
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 : Why do analysts compute financial ratios

    Why do analysts compute financial ratios? Ratios are comparative measures.  Since the ratio illustrates relative value, they let financial analysts to compare information which could not be compared in its raw form.  For instance, rati

    		•
  • Q : Describe the P-E valuation method

    Describe the P/E valuation method. Under what conditions a stock should be valued by using this method?The P/E ratio denotes how much investors are keen to pay for each dollar of a stock's earnings. A high P/E ratio denotes that investors belie

    		•
  • Q : Illustrates new balance sheet Normal 0

    Normal 0 false false

  • Q : What is means of correlation

    What does this mean while we say that the correlation coefficient for two variables is -1? What does it mean if this value were zero? What does it mean if it were +1?Correlation is calculated by the correlation coefficient, represented through t

    		•
  • Q : Describe the effect of stock dividends

    Describe the effect of stock (not cash) dividends and stock splits onto the market price of common stock? Why do corporations state stock splits and stock dividends? Stock splits & stock dividends decrease the price per share of the common

    		•
  • Q : What are a banks main reserves What are

    What are a bank's main reserves? Vault cash & deposits in the bank's account at the Fed are utilized to satisfy these reserve requirements; they are termed as primary reserves.  These primary reserves are non-interest-earning assets hel

    		•
  • Q : Define Sponsor Sponsor : It is an

    Sponsor: It is an individual, group, or organization which initiates or brings to a Legislator's attention a proposed law modification.

    		•
  • Q : What is Bond Funds Bond Funds : For

    Bond Funds: For legal basis budgeting aims, funds utilized to account for the receipt and disbursement of non-self liquidating common obligation bond proceeds. Such funds do not account for the debt retirement as the liability made by the sale of bond

    		•
  • Q : Impotence of distinction Normal 0 false

    Normal 0 false false

  • Q : Describe Section 28.50 Section 28.50 :

    Section 28.50: It is a Control Section of the Budget Act which authorizes the Department of Finance to increase or reduce the reimbursement line of an appropriation schedule for the reimbursements received from agencies of other state. It too contains

    		•