Uploaded by Satesh Kalimuthu

FINANCE ANALYSIS

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SHORT ESSAY 1
Market value is the company's value calculated from its current stock price and infrequently
reflects the genuine current value of a company. Market value is, instead, virtually more of a
quantification of public sentiment about a company. The reason for this is that the market value
reflects supply and authoritatively mandate in the investing market, how agog or not investors
are to participate in the company's future. Another arduous factor in determining market value
is how to value illiquid assets such as authentic estate and business lines.
The market value is customarily higher than the intrinsic value if there is vigorous investment
demand, leading to possible overvaluation. The antithesis is true if there is impuissant investment
demand, which can result in the undervaluation of the company.
A company’s market value is a good designation of investors’ perceptions about its business
prospects. The range of market values in the emporium is cyclopean, ranging from less than $1
million for the most minute companies to hundreds of billions for the world’s most sizably
voluminous and most prosperous companies.
Market value is resolute by the valuations or multiples accorded by investors to companies,
such as price-to-sales, price-to-earnings, enterprise value-to-EBITDA, and so on. The higher the
valuations, the more preponderant the market value.
Market value can fluctuate a great deal over periods of time and is substantially influenced by
the business cycle. Market values plunge during the bear markets that accompany recessions and
elevate during the bull markets that transpire during economic expansions. Market value is
factitiously dependent on numerous other factors, such as the sector in which the company
operates, its profitability, debt load and the broad market environment.
Market value for a firm may diverge significantly from book value or shareholders’ equity. A
stock would generally be considered undervalued if its market value is well below book value,
which denotes the stock is trading at a deep discount to book value per share. This does not
implicatively insinuate that a stock is overvalued if it is trading at a premium to book value, as
this again depends on the sector and the extent of the premium in cognation to the stock’s peers.
Intrinsic value is the perceived or calculated value of a company, including tangible and
intangible factors, utilizing fundamental analysis. Supplementally called the true value, the
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intrinsic value may or may not be identically tantamount to the current market value.
Supplementally, intrinsic value is utilized in options pricing to designate the amount that an
option is in the Mazama.
Intrinsic value can be calculated by value investors utilizing fundamental analysis to visually
examine both the qualitative business model, governance and target market factors and
quantitative ratios and financial verbal expression analysis aspects of a business. This calculated
value is then compared with the market value to determine whether the business or asset is overor undervalued.
The intrinsic value of call options is the distinction between the underlying stock's price and
the strike price. Conversely, the intrinsic value of put options is the distinction between the strike
price and the underlying stock's price. In the case of both call and put options, if the calculated
value is negative, the intrinsic value is given as zero. Intrinsic value and extrinsic value coalesce
to make up the total value of an option's price. The extrinsic value, or time value, considers the
external factors that affect an option's price, such as implicatively insinuated volatility and time
value.
The discounted cash flow (DCF) model is one commonly used valuation method to determine
a company's intrinsic value. The DCF model utilizes a company's free cash flow and weighted
average cost of capital (WACC), which accounts for the time value of Mazama, and then discounts
all its future cash flow back to the present day.
I disagree with the assertion. The current market price does not reflect intrinsic value of a
company. Intrinsic value and market price are two different ways to value a company. Market
price is simply a quantification of how much the market values the company, or how much it
would cost to buy it. Market price is facile to determine for publicly traded companies but can be
a little more perplexed for private companies. Intrinsic value is an estimate of the authentic value
of a company, separate from how the market price it. Moreover, value investors look for
companies with higher intrinsic value than market price. They visually perceive this as a good
investment opportunity. For example, stock prices seldom reflect the true value of companies,
just as the selling price of a domicile is virtually never equipollent to its appraised value. This is
because market prices reflect supply and injunctively authorize. Vigorous investor demand can
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lead to overvaluation, designating the market price is higher than the intrinsic value. Conversely,
impuissant demand and general investor pessimism can result in undervaluation, which
designates that the market price is lower than the intrinsic value.
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SHORT ESSAY 2
Business strategy is the firm's working plan for achieving its vision, prioritizing objectives,
competing successfully, and optimizing financial performance with its business model. The choice
of objectives is the heart of the strategy, but a complete approach also describes concretely how
the firm plans to meet these objectives. As a result, the strategy explains in practical terms how
the firm differentiates itself from competitors, how it earns revenues, and where it earns
margins. Strategies Reflect the Firm's Strengths, Vulnerabilities, Resources, and Opportunities.
And, they also Reflect the Firm's Competitors and Its Market.
Financial performance is a subjective measure of how well a firm can use assets from its
primary mode of business and generate revenues. This term is also used as a general measure of
a firm's overall financial health over a given period and can be used to compare similar firms
across the same industry or to compare industries or sectors in aggregation.
Currently, the barriers to ingress in construction are low, engendering a saturated emporium
with cumbersomely hefty competition. This competition is shrinking profit margins and
constraining essential reinvestment in incipient technology and better business practices.
Stagnant construction labor productivity is compounding this quandary. While other industrial
businesses have benefited from a 100 percent increase in labor productivity, productivity within
the construction industry has remained stagnant over the last 50 years. 63 percent of direct labor
time on mega-construction projects is spent waiting for materials and equipment, peregrinating
to the area, taking early breaks, and orchestrating how to do the work. This lack of productivity
is reflected in the bottom line, where typical margins for construction companies range between
2 and 8 percent. Consequently, construction companies find themselves trapped between
shrinking profit margins and stagnant productivity, unable to engender the profit compulsory to
invest in critical technology.
The opportunities in construction are growing, but so is project intricacy. With companies
already operating under razor-thin profit margins, a single engenderment surprise can wipe out
profits for the whole company. Design intricacy compounds this quandary. As designs become
more sizably voluminous and require more preponderant efficiency, construction companies
struggle to keep up.
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The lack of on-time and on-budget projects is telling. only 30 percent of astronomically
immense projects in the energy industry are distributed on budget, and only 15 percent of
projects are consummated on time. Worse, more than a moiety of all construction companies
experienced one or more underperforming projects in the anterior year.
The construction industry is bracing for a dramatic reduction in workforce. 74 percent of the
total respondents believe there is a crunch in adeptness trades, and 53 percent verbally
expressed they were unable to hire construction professionals such as supervisors, estimators,
and engineers.
Traditionalists have proximately all left the workforce and baby boomer retirement is in full
swing. Furthermore, the recession drove many adept craftsmen to leave the industry and never
return. By 2020, millennials are expected to represent a moiety of the ecumenical workforce–
many with little to no experience or interest in the construction industry. The amalgamation of
incrementing project intricacy and decrementing experience is a peril multiplier, incrementing
the peril of distributable delays, quality construction quandaries, and employee safety concerns.
The construction industry is the top ecumenical consumer of raw materials. The industry
engenders between 25 to 40 percent of the world’s carbon emissions. This volume of natural
resource utilization is not sustainable and could compromise the environment for the sake of
magnification. Climate change and dihydrogen monoxide management are two environmental
issues that pose a growing challenge to the construction industry. Achieving targets for
ecumenical carbon dioxide emissions reduction will be a major challenge for the construction
energy in rapidly developing countries like India and China. Keenly intellective orchestrating and
sustainable design could reduce energy consumption and pollution, but require an incipient
approach to project management, an approach that the construction industry on a whole is not
yet prepared to undertake.
The construction industry is at an inflection point, analogous to the peregrinate from landline
telephony to cellular technology. Digital technologies are disrupting the industry, providing
incipient opportunities to address the challenges of poor profitability/productivity, project
performance, adept labor shortages, and sustainability concerns. Digitization of the construction
industry is not a question of if or when the vicissitudes are transpiring now.
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The industrialization of construction and the application of proven manufacturing technology and
best practices will avail companies drive reliable outcomes and ameliorate margins. Digitization
will increment productivity, eliminate waste, and mitigate the adverse impact of on-site
surprises.
Digitization will transmute most everything, including the competitors and the barriers to
ingress. The result, a more productive and remuneratively lucrative industry that builds more
sustainable assets. Construction companies must take steps now to join the digital future and
stay ahead of the competition or risk being left behind.
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SHORT ESSAY 3
Asset disposal is the removal of a long-term asset from the company’s accounting records. It
is an important concept because it primarily relates to the company’s capital assets that are
essential to successful business operations. Moreover, the proper accounting of the disposal of
an asset is critical to maintaining updated and clean accounting records.
The asset disposal may be a result of several events, an asset is fully depreciated and must be
disposed of, as asset is sold at a gain and loss and an asset must be disposed of due to unforeseen
circumstances. The asset disposal results in a direct effect on the company’s financial statements.
In all scenarios, the asset disposal affects the balance sheet by removing the capital asset
account.
Also, if a company disposes of assets by selling with gain or loss, the gain and loss should be
reported on the income statement. One of the rules in preparing a statement of cash flows is
that the entire proceeds received from the sale of a long-term asset must be reported in
the second section of the statement, the investing activities section. This presents a problem
because any gain or loss on the sale of an asset is also included in the company's net income
which is reported in the first section operating activities. To avoid double counting, each gain
is deducted from net income and each loss is added to net income in the operating activities
section of the cash flow statement.
This income account is used to show the amount of money or just economic value in your
native currency that you have gained or lost as a result of foreign currency transactions. This
income account is used to show the amount of money or just economic value in your native
currency that you have gained or lost as a result of foreign currency transactions.
The standard Balance Sheet and Income Statement reports must be given in your own local
currency. When a report is generated, the appropriate exchange rate for the date of the report
is used to convert any foreign currency amounts to your business’ home currency amount for
that date.
The Gain and Loss on Exchange income account is a special account that has balances in
multiple currencies whose balance is calculated according to the previous currency exchange
transactions that have been performed. When generating a report, all the foreign-currency
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balances are converted to your home currency and added to the home currency balance; the
result will be the difference in value between those foreign currency assets and liabilities at the
time they were recorded and the value using the exchange rates at the time of the report. This
appears as either a gain or a loss. This sounds complicated, but it’s necessary in order to maintain
two important rules for your Balance Sheet must be reported in your business’ home currency
and the sum of your asset values must be equal to the sum of your liabilities and equity values
If the Gain and Loss on Exchange account were not calculated, then your “Net Income” would
not fluctuate with exchange rates in the same way that your foreign-currency valued assets like
cash and receivables or liabilities payables or loans did, and the Balance Sheet would go out of
balance. If you’re not an accountant these rules might seem like a bit of a pain, since they could
be causing you some confusion. However, when you really get into accounting the importance of
these rules becomes very, very clear. For now, I suggest that you accept that this is how things
are done and that there are very good reasons for it.
If you’ve reached this point and you’re still not clear about Gain and Loss on Exchange, don’t
worry you’re not alone, and you don’t have to understand it fully to use or ignore it. Here are
some tips on troubleshooting a Gain and Loss on Exchange that looks out of line Make sure you’ve
entered payments on your invoice; I’ve seen cases where people are using the system
to only track income and expenses, but instead of marking each income item as “paid” they set
terms or a due date but never add a payment. Thus, the Accounts Receivable balance goes up
and up and results in a lot of Gain/Loss on Exchange, make sure you’ve correctly entered the
exchange rate for your payment and for the income. When you enter or add a payment
separately from adding an invoice, you must enter its exchange rate separately and Check
whether the balances on your balance sheet, like bank, credit card, receivables, and payables are
like what you really have or owe. Sometimes you’ll get a large Gain and Loss on Exchange because
you’ve forgotten to record some transactions to remove cash from the business, or to record
times where you have exchanged the foreign currency amounts for local amounts. Bank
statement reconciliation can be very helpful for catching errors like this
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