Three financial factors that affect the value of a business
Explain the three financial factors that affect the value of a business.
Expert
The three aspects that affect the worth of a firm's stock price are cash flow, timing, and risk. a) The Importance of Cash Flow: cash pays the bills in business. It is also what the firm receives in ex exchange for its products and services. Cash is therefore of critical importance, and the expectation that an organisation will generate cash in the future is one of the factors that gives the firm its value. b) The Effect of Timing on Cash Flows: Owners and potential investors look at when firms can expect to receive cash and when they can expect to pay out cash. All other factors being equal, the sooner companies expect to receive cash and the later they expect to pay out cash, the more valuable the firm and the higher its stock price will be. c) The Influence of Risk: Risk affects value because the less certain owners and investors are about a firm's expected future cash flows, the lower 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 short, companies whose expected future cash flows are doubtful will have lower values than companies whose expected future cash flows are virtually certain.
What are different volatilities in vanilla equity option?
Suppose a currency swap wherein two counterparties of comparable credit risk each borrow at the best rate obtainable, yet the nominal rate of one counterparty is greater than the other. After the primary principal exchange, is the counterparty i.e. required t
Illustrates an example of complete and incomplete markets?
How can the FX futures market be utilized for price discovery?To extent that FX forward prices are an unbiased predictor of future spot exchange rates, the market anticipates whether one currency will appreciate or depreciate versus another. Si
What are the Most Useful Performance Measures?
Explain the term Linear or non-linear in finite-difference methods.
The discussion of zero-coupon bonds in the text gave an instance of two zero-coupon bonds issued through Commerzbank. The DM300, 000,000 issues due in the year of 1995 sold at 50 percent of face value and the DM300, 000,000 due in the year of 2000 sold a
How much more demand of return is appropriate for a share of common stock by risk-averse investors, when compared to a Treasury bill?
Explain the advantages and limitations of the internal rate of return method?
Illustrates an example of GARCH.
18,76,764
1925271 Asked
3,689
Active Tutors
1431388
Questions Answered
Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!