Question

In: Accounting

1. Describe any four (4) suitable situations that may lead to the valuation of shares.

1. Describe any four (4) suitable situations that may lead to the valuation of shares.

Solutions

Expert Solution

Answer : Four (4) suitable situations that may lead to the valuation of shares is as follows :-

1. Mergers and Accquisition :

  • If a comapny is having a growth prospect mergers and accquisition provide a great platform for this.
  • Valuation of shares are done to find out the fair price of shares which is to be paid to acqurring comapny.

2. Exit Strategy Planning :

  • If any company is planning to sell it's business in the market the best method is to set a base line for valuation of share.
  • It hepls the company to attain the maximun profitability.

3. Funding :

  • When investors want to raise fund from the market the best possible way to generate maximum funds from banks is to value their shares prices.
  • Professionals help investors by correctly valuing shares and make them raising fund from the banks.

4. Litigation :

  • During any litigation or any loss caused by company or to the company valuation of shares help the company to find out the actual payment to be done or to be received.
  • Actual worth of a business can be find out by proper valutaion of shares.

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