--%>
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 : Change in supply of money Normal 0

    Normal 0 false false

  • Q : What do you mean by the term Year of

    Year of Appropriation (YOA): It refers to the initial year of an appropriation.

    		•
  • Q : Resolving ranking conflict Describe how

    Describe how to resolve a "ranking conflict" among the net present value and the internal rate of return. Why should the conflict be resolved as you described? Whenever there is a ranking conflict among net present value and internal rate of re

    		•
  • Q : Define Financial Planning Financial

    Financial Planning: It is a comprehensive assessment of an investor's present and future financial state by employing presently known variables to forecast future cash flows, asset values and the withdrawal plans.

  • Q : Define Veto Veto : It is the Governor's

    Veto: It is the Governor's Constitutional authority to reduce or remove one or more items of appropriation while accepting other parts of a bill.

    		•
  • Q : Clarify trade credit is free credit or

    Trade credit is free credit. Do you agree or conflicting with this statement? Clarify. Trade credit is not free. It contains a cost. Who bears that cost based on the terms of the transaction among the grantor and the recipient of the trade c

    		•
  • Q : What is Budget Act Budget Act (BA): The

    Budget Act (BA): The annual statute authorizing state departments to use up appropriated funds for the aims stated in the Governor's Budget and improved by the Legislature.

    		•
  • Q : Summer Co. is expected to pay a

    Summer Co. is expected to pay a dividend or $4.00 per share out of earnings of $7.50 per share. If the required rate of return on the stock is 15% and dividends are growing at a current rate of 10% per year, calculate the present value of the growth opportunity for the stock (PVGO)

    		•
  • Q : What is Non-governmental Cost Funds

    Nongovernmental Cost Funds: For lawful basis purposes, employed to budget and account for revenues other than common and special taxes, licenses, and fees or some other state revenues.

    		•
  • Q : Microeconomics or macroeconomics Denote

    Denote whether each of statements applies to microeconomics or macroeconomics: a. In Canada, the unemployment rate was 7.0 percent in January 2005. b. A Canadian software firm d

    		•