THE FINANCE AND INVESTMENT

Running Head: FINANCE AND INVESTMENT
FINANCE AND INVESTMENT
Name of the Student
Name of the University
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1FINANCE AND INVESTMENT
Table of Contents
Introduction................................................................................................................................2
Discussion..................................................................................................................................2
Corporate Valuation...............................................................................................................2
Company and Market Growth Forecast.................................................................................4
Total Value of Firm................................................................................................................5
Conclusion..................................................................................................................................7
Reference....................................................................................................................................9

2FINANCE AND INVESTMENT
Introduction
The corporate valuation helps in answering the question that relates to how much the
company is worth of. There consist of standard tools, methods and ratios used by the
financial analysts for determining worth of company and overvaluation and undervaluation of
stock. The valuation of business is general process for determining economic value of the
company unit or whole business. It is the process and set of the procedures used for
estimating economic value of interest of the owner in business. The value of firm is
discounted value of its future flows of cash. The market value of firm is total value of the
outstanding securities (Hering, Toll and Kirilova 2015). Hence, this assignment includes
discussion on the extent to which industry or the business growth aids towards firms value
predictions and measurement.
Discussion
Corporate Valuation
The valuation is referred as process for determining present value of the asset or
company. This can be done by using different techniques. The analysts who wants to place
value on company, they normally look at management of business, its composition of capital
structure, market value of assets of the company and prospective earnings of future. The
valuation may be used for determining fair value of security. It depends on amount that buyer
is ready for paying seller. It is done with the assumption that both of the parties enter into
transactions (Farooq and Thyagarajan 2014).
It is during security trading on exchange, buyers and sellers dictates market value of
the stock or bond. The intrinsic value is referred as perceived value of security based on
future earnings or other attributes of entity, which are not related to the market value of
security. Hence, analysts’ work when doing the valuation of company. The company can be

3FINANCE AND INVESTMENT
overvalued or undervalued by market. The valuations can be performed on liabilities or assets
such as bonds of company. It is required for various reasons such as financial reporting,
litigations, investment analysis, capital budgeting and transactions of merger and
acquisitions. The firm’s business valuation is significant exercise because it helps in
improving company. The reason for performing business valuation includes litigation, exit
strategy planning (Goedhart, Koller and Wessels 2015).
Knowing the worth of corporation and whether the stock is overvalued or undervalued
is vital, when it comes to acquisition, mergers, market instability and financial stress. One of
the common method for determining company’s value is also known as asset based method.
This method uses book value of firm’s equity. It determines value of firm’s assets minus its
liabilities. Regardless of whether it is tangible items, for instance working capital and cash or
the intangible items such as reputation and brand name, equity is considered as to be the most
vital factor (de Almeida and Eid Jr 2014). The equity is considered as everything, which is
possessed by company if they stop making money and doing business. Further, most of the
accountants prefers for using traditional method of balance sheet. It is the excellent method
for determining quickly if firm is having more cash on hand rather than the current value of
market (Goedhart, Koller and Wessels 2015).
Another popular measure of accounting value is the current working capital of
company in comparison to its market capitalization. The working capital is referred as what is
left after subtracting current liabilities from the current assets. The working capital are funds,
which firm can access quickly for conducting daily transactions of business. The knowledge
about accurate working capital amount is essential for the business that invest and trade.
Alternatively, equity of shareholders is the accounting tool, which encompasses liquid assets
of company such as retained earnings, property and cash (Hering, Toll and Kirilova 2015).