Question

Valuation of a firm’s financial assets is said to be based on what is expected in the future, in terms of the future performance of the firm, the industry, and the economy. What types of value would you consider when assigning “value” to a firm’s stock or bond? What is the significance of each of the different types of value in the valuation process? Use examples to support your response.

Answer 1

ANSWER:There are different sorts of estimation of an offer or bond. These are :

• Book-value
• Par Value
• Value at a Premium
• Value at a Discount
• Quoted Value
• Market Value
• Fair Market Value
• Intrinsic Value
• Yield Value

essentialness are talked about underneath

1) Book-value: Book estimation of offer is the worth expressed in the Articles of Association. It is otherwise called Face Value or Nominal worth and appeared in the books of records and Balance Sheet.

2) par Value: par esteem is the ostensible or assumed worth of an offer.

3) value at a premium: If shares are sold or given at a value more than the book esteem, at that point it is called an incentive at a higher cost than expected. Assume portions of Rs. 10 each are sold or given at Rs. 12 every, this estimation of Rs 12 is called an incentive including some built-in costs. Rs. 2 is premium paid on the portion of Rs. 10.

4) value at a discount: If shares are sold or given at a value lower than their book or presumptive worth, it is called Value at a Discount. On the off chance that a portion of Rs. 10 is sold at Rs. 9, at that point it is an instance of Value at a Discount. In any case, for all bookkeeping reason, the book estimation of Rs. 10 is recorded.

5) quoted value: Quoted esteem is the estimation of an offer expressed by the stock trade toward the finish of a day's exchange.

6. Market Value: Market estimation of an offer is the cost at which the offer is bought or sold in the market. For every single handy reason, stock trade provided cost estimate is taken as the market cost.

7)Fair market value: It is the cost of an offer which concurred in an open and unhindered market among educated and agreeable partakers managing at a safe distance who are completely educated and are not under any impulse to execute.

8)intrinsic value: Realizable estimation of all out net resources isolated by the quantity of offers remarkable is the characteristic estimation of an offer This worth is otherwise called Asset Back Value of offers.

9. Yield Value: This estimation of an offer is otherwise called Capitalized benefit of Earning Capacity. Ordinary pace of return in the business and genuine or expected pace of return of the firm are mulled over to discover yield estimation of an offer.

The significance of valuation of offers can be comprehended from the accompanying:

1. Stock Exchange cited esteem frequently neglects to mirror the genuine worth of offer. This is pertinent just to conventional exchanges of offers, when few offers are bought or sold. Provided cost estimate isn't reasonable for buy or offer of major or controlling offers. Further, all offers are not cited on Stock Exchange. Subsequently, valuation of unquoted shares is likewise important for moving offers starting with one individual then onto the next individual.

2. The significance of valuation of offers additionally emerges if there should arise an occurrence of amalgamation of organizations when there is the requirement for having a reasonable valuation of offers to settle the price tag.

3. Some of the time inclination offers and debentures are changed over into value shares according to the terms of issue. In such case, a crisp valuation strategy ought to be embraced for value offers to figure the trade proportion.

4. To acquire credits from budgetary establishments offers and debentures can be offered as security. For such a reason valuation of offers is fundamental to evaluate the genuine worth of the offers vowed for getting credits.

5. At the point when a Public Sector Undertaking is changed over into a restricted organization by methods for open issue of portions of such endeavor, valuation of these offers gets fundamental. At the point when the portions of a constrained organization are taken over by the legislature under a plan of nationalization, it is important to esteem the portions of the concerned organization so as to remunerate the investors.

• I might likewise want to give the distinctive valuation techniques quickly:

A) Valuation of Equity Shares.

(B) Valuation of Preference Shares.

For the most part the accompanying techniques for valuation of offers are being used. These are:

a) an Intrinsic Value Method; and

(b) Yield Method.

(a) Net Asset Method This strategy is otherwise called Intrinsic Value Method, Asset Backing Method, Equity Method, Assets Balancing Method or Assets Valuation Method.