Explain the following when valuing a company, ensuring to show the interconnecte

Question

Explain the following when valuing a company, ensuring to show the interconnectedness of each. Argue both sides of the topic if possible.
1. What internal and external factors lead to the perceived valuation of a company and how does these factors affect the perceived value?
2. What internal and external factors lead to the financial statement value and how do these factors affect the perceived value? Explain the following when valuing a company, ensuring to show the interconnectedness of each. Argue both sides of the topic if possible.
1. What internal and external factors lead to the perceived valuation of a company and how does these factors affect the perceived value?
2. What internal and external factors lead to the financial statement value and how do these factors affect the perceived value?
1. What internal and external factors lead to the perceived valuation of a company and how does these factors affect the perceived value? 1. What internal and external factors lead to the perceived valuation of a company and how does these factors affect the perceived value?
2. What internal and external factors lead to the financial statement value and how do these factors affect the perceived value?

Explanation / Answer

1.Valuing a company is equivalent to finding a worth a company based on several parameters to identify whether the market gives higher valuations to what it actually commands. There are several internal as well as external factors comes into picture while interpreting the intrinsic value of a company.

Internal and External Factors:

Internal: Operating efficiency, Profitability, Capital Expenditure, Return on Capital Employed, and Free Cash Flows.

External: Industry growth, Peers Pricing, Resource availability, Customer satisfactions, and Nature of a market.

The factors above affect the companies' valuations, as they drive the company’s fundamental and other financials aspects. A company would be given a higher valuations based on the market acceptance of its goods and services, or in other words whether it provides value for price it commands from consumers. At the same time, the company's internal factors needed to be strong enough to gain operating efficiency, and the return it generates while leveraging its assets as well as capital that it has employed to produce goods and services.

2.Internal and External Factors:

Internal: Operating assets, Pricing, Production Volume & Capacity, Cost Optimization, and Leverage.

External: Demand, Supply, Seasonal Trend and Economic & Political factors.

The factors above frame the financials of a company which keep on fluctuating based on the changes in seasonal demand and the availability of resource to suffice the needs of consumers. At times, the company need to bear higher cost due to sudden changes in the economic and political factors which lead to increase in operating expense and decrease in margin. The changes do impact the company's inflows and outflows of cash due to unexpected increase in cost and expenditures.

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