Investment valuation analysis

Document Type:Essay

Subject Area:Finance

Document 1

There are some of the assets that can easily be valued with varying information. There are many forms in which an investor can make gains, for instance, the financial profit, earnings from the interest, and the appreciation of the assets in the market. Investment valuation entails reflection of the risks, returns besides the expectations of growth by the use of the performance in the UK stock market. Furthermore, a market is considered efficient when the total numbers of entrepreneurs who actively compete and are in a position of predicting the future market value of the distinct securities. As a result of the healthy competition the market, the products and services that are supplied in the market are of high quality thus meeting the consumers' demands.

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The recorded variation in quantity supplied and demanded results from the changes in the essential price information to the market thus forcing the price to move to the latest equilibrium. In an actual sense, it is difficult for testing than on its strong form because it lacks intellectual rigor. Whereas, the weak-form of Efficient Marketing Hypothesis is the weakest and cannot be relied on because it confines itself to the historical information over the share prices thus making it hard to be used in the modern competitive market. The costs of the shares cannot be projected from the historical prices because of some of the uncertainties that are associated with the business' opportunity in the market (Orlitzky, M. Furthermore, the returns generated can be defensible through the associated difficulties for holding specific investments opportunities in the marketplace.

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The profit generated would, therefore, should be channeled to other businesses opportunities that are available in the market with high expected returns thus leading to more generation of profit. It also increases the ability of the firm in negotiating a high price for selling the company. Besides, it enhances the strength of the company to attract more investors to come and invest in the company. The potential investors should be provided with the valuation estimates in relation to their funding (Urquhart, A. and McGroarty, F. The price of a share is the key determinant factor when making the investment decisions by the investors. The marketable securities include stocks, options while the intangible assets include the trademarks and patents of the businesses.

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Most of the entrepreneurs have also been investing in liabilities such as the bonds that have been issued by the company. The valuation of the security is important because it is helpful for the investment analysis by the entrepreneurs in the marketing. It is also beneficial in capital budgeting decisions which make the company invest in the most viable investment opportunities that are available in the market. It has led to more investors channeling their resources to those companies that would ultimately increase on the value of their shares. Determination of the appropriate discounting rate that would be used in discounting all the future cash flows in calculating their respective net present values of different projects. The financing structure besides the existing conditions of the market needs to be analyzed extensively so that the computed discounting rate would be reliable to the users of the information.

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It, therefore, provides the overall average cost of capital thus allowing the company and investors in making relevant financial decisions such whether to continue funding the projects basing on the potential return of the projects. The shares of the investors will only increase if the company generates more profits from its business's dealings in the market (Brigham, E. It helps the management of the companies and investors in deciding on whether they should continue investing in the projects or not (Serena Chiucchi, M. The entrepreneur in the market may as well go further and make the necessary acquisition depending on the calculated NPV. Most of the companies and trading agencies have been in a better position of channeling their resources in the viable projects hence generating more returns.

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They take advantage of the fall in the price of the securities in the capital market by maximizing on the purchases accordingly increase their chances of maximizing the profits in the market. Conclusion In summary, the valuation of the security plays a critical role in deciding the portfolio that should be invested in by the potential investor in the market. and Shakespeare, C. Fair value accounting for financial instruments: Does it improve the association between bank leverage and credit risk? The Accounting Review, 88(4), pp. Berge, K. , Consigli, G. , and Ziemba, W. Financial Management: Theory and Practice, Canadian Edition. Nelson Education, 14(1), pp. 114-120 Choudhry, T. and Jayasekera, R. Level of efficiency in the UK equity market: an empirical study of the effects of the global financial crisis.

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