List and explain the three financial factors that influence the value of a business.
Ans: The three issues that influence the value of a firm's stock price are cash flow, timing, and risk.
The Importance of Cash Flow: In business, cash is what pays the bills. It is as well what the firm receives in exchange for its services and products. Hence cash is of ultimate significance, and the expectation that the firm will produce cash in the future is one of the factors that provides the firm its value.
The Effect of Timing on Cash Flows: Owners and potential investors look at while firms can suppose to receive cash and while they can expect to pay out cash. All other issues being equal, the sooner companies suppose to receive cash and the later they suppose to pay out cash, the much more valuable the firm and the higher its stock price will be.
The Influence of Risk: Risk affects value as the less specific owners and investors are about a firm's expected future cash flows, the lower they will value the company. The more particular owners and investors are about a firm's supposed future cash flows, the higher they will value the company. In short, companies whose supposed future cash flows are doubtful will have lower values as compared to companies whose expected future cash flows are virtually fixed.