This is a discussion reply to 2 posts. The replies only have to be 150 words each.
The first reply is on the following:
There are many factors that impact a company’s stock price and the perceived value of the business. Therefore, it is important to distinguish the difference between perceived value and the financial status of a company. Perceived value is how a customer perceives a product and weighs the desirability of this product or service comparatively to its competitors (Kopp, 2021, para. 3). Financial statements, on the other hand, provide the answer to how a business operates. This means how much revenues they generate, what it costs to do business, and how the company manages its cash, among other details. Many factors come into play when looking at the value of a company, such as profit margins, growth potential, reputation, concentration, and competitive advantages. All these factors can benefit a company financially and build upon the perceived value customers already hold upon considering the business. Profit margins show how effective the company is at making money while growth potential is helpful in gauging the organization’s future ability to expand production and increase profits. The reputation a company has is always changing and shows the public’s view of the company and how they operate in regard to the products and the employees. The concentration of a company can mean various things, but in this example the concentration is the market share the company holds. This is key to understanding where the company stands against its competitors. The last factor to discuss is competitive advantages a company holds. These are the factors that set a company apart from the competition by providing a better product than its rivals. For instance, “Strong gross margins are generally indicative of a company possessing competitive advantages through valuable, differentiated offerings, unique distribution channels and/or enhanced production capabilities” (Kingsbury, n.d., para. 6). Companies create value for stakeholders by solving problems. Whether that be providing a need to the market or internal solutions within the company. Matthew 10:16 reads, “I am sending you out like sheep among wolves. Therefore be as shrewd as snakes and as innocent as doves” (New International Version). This parable shows the good stewards investing their resources with wisdom as companies today should do also.ReferencesKingsbury, B. R. (n.d.). Seven factors impacting business valuation. MCM Capital Seven Factors Impacting Business Valuation Comments. https://www.mcmcapital.com/2020/04/seven-factors-impacting-business-valuation-2/ (Links to an external site.)Kopp, C. M. (2021, May 19). Understanding perceived value. Investopedia. from https://www.investopedia.com/terms/p/perceived-value.asp#:~:text=Perceived%20value%20is%20a%20customer’s,for%20a%20good%20or%20service.
The second reply is on the following:
The easiest way to pinpoint the actual valuation of a company is by looking at the heart of its health being its finances in both its quarterly earnings announcements and published Securities Exchange Commission (SEC) 10K fillings to the United States federal government annually. Rather than looking over these documents, the easily perceived method and norm by the public is to look at the company’s market performance on wall street to grasp a better understanding for where a company is currently valued at. A company’s stock price is a direct representation of what both current and potential investors perceive as the firm’s ability to earn and grow capital currently and towards the future (Rusdiyanto & Narsa, 2019). This still leaves us however with the obvious question of how and why do investors choose to invest into a company or organization? For some, the choice to invest lies in the fact of the potential factor of a company, the best example in comparison to this statement is Tesla in the emerging electric vehicle market. For others, the choice to invest in a company lies upon the basis of the firm being considered a relatively safe option due to consistent performances within the markets year after year such as Apple inc. For firm executives, maximizing shareholder wealth is typically one of the most important strategic wants the company wants to create since undoubtedly the main goal behind an investment put forth towards a company is made for the hopes of a return in profits towards an individual’s portfolio.There are several external factors however that contribute vastly to the valuation of a company’s worth both positively and negatively. Positively in this case for example, Tesla’s CEO, Elon Musk, has been able to achieve quite the reputation since the company’s stock price surge dating back in December of 2019 that has now allowed Mr. Musk to accumulate personal wealth at a rate never witnessed before in human history. The perception Musk has been given is that he is this centuries Steve Jobs which gave him the power of truthfully when he speaks, the world simply take notice. Mr. Musk has been able to control and regulate numerous entities outside of his daily activities such as the cryptocurrency markets. Investment put forth in this virtual currency platform as we know are considerably volatile but provide an exceptional opportunity potentially for great profits to be made. Elon Musk using twitter as he quite relatively does, tweeted and announced in March of 2021 that Tesla was going to purchase two-billion dollars’ worth of bitcoin (Kovach, 2021). At the time, this made Tesla the largest shareholder of any company by a substantial margin of the virtual currency. Within twenty-four hours of the companies announced purchased of bitcoin, the virtual currency skyrocketed to all-time highs and in return made Tesla well over one-hundred million dollars in profits (Kovach, 2021). Having a brilliant and globally recognized businessmen such as Elon Musk at the helm of an organization can contribute immensely to a company’s valuation since the perception given to that of the public is that success is only that more imminent to come for the business’s performance within the markets.Factors that affect more negatively to a firms perceived valuation could be uncontrollable environmental catastrophes such as the COVID-19 pandemic. The pandemic as we all know left much of corporate America and small businesses in ruin through its wrath it poised on us. The pandemic essentially halted nearly all operational procedures that many firms would normally conduct to generate profits due to areas of concern such as government mandated stay at home orders and supply chain disruption (Zhang et al., 2021). Major organizations such as Ford, Volkswagen, and Chevy in the motor vehicle industry in this case suffered immense failures in all capacities and brand devaluation on a global scale. Candidly speaking, the demand for motor vehicles was no longer needed on a mass scale due to mandated stay at home orders, and on top of that production had to be halted for both reasonings. Firms in this case that cannot persevere amid nature’s greatest anomalies can bring upon the perception of devaluation to the eyes of the masses since revenues cannot be accumulated due to unforeseen times in life.References/ BibliographyKovach, S. (2021, February 8). Tesla buys $1.5 billion in bitcoin, plans to accept it as payment. CNBC. Retrieved May 25, 2022, from https://www.cnbc.com/2021/02/08/tesla-buys-1point5-billion-in-bitcoin.htmlRusdiyanto, R., & Narsa, I. M. (2019). The Effects of Earnigs Volatility, Net Income and Comprehensive Income on Stock Prices on Banking Companies on the Indonesia Stock Exchange. International Review of Management and Marketing, 9(6), 18-24. http://ezproxy.liberty.edu/login?qurl=https%3A%2F%2Fwww.proquest.com%2Fscholarly-journals%2Feffects-earnigs-volatility-net-income%2Fdocview%2F2501459011%2Fse-2Zhang, T., Gerlowski, D., & Acs, Z. (2021). Working from home: Small Business Performance and the COVID-19 pandemic. Small Business Economics, 58(2), 611–636. https://doi.org/10.1007/s11187-021-00493-6
This is a discussion reply to 2 posts. The replies only have to be 150 words each.