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Essay on Shareholder Value
Finance & Accounting
Pages 7 (1757 words)
Name: Tutor: Course: Date: University: The expression shareholder value refers to that value which a shareholder gets from the investment he/she has made in a given company. It constitutes dividend payments, capital gains, buyback programs proceeds plus any other payouts that may be obtained by a shareholder from the company.
These dividends form an incentive to the shareholders to hold a company’s stock. Capital gain is the gain that if gotten above an assets original buying price upon disposal. Any realised capital gain forms an investment that has been disposed off as at a profit. An unrealised capital gain may on the other hand refer to an investment which is yet to be disposed off, but would lead to a profit if it was disposed off. Assets that can realise capital gains may include options, bonds, shares/stock, or businesses. A buyback kind of program involves a situation where a company repurchases its bond or stock that it had issued previously. In that case, the amount of stock that is outstanding reduces and this gives the shareholders that are remaining a bigger ownership stake of that company in the process. (investorwords.com, 2011) Investors in the world over have gotten more informed and, thus, if they have made an investment in a stock and that stock has proven not of much return as they would have wanted, then, they are unlikely to continue holding on to that stock. Thus, this escalated demand for shareholder value has led to a lot of pressure upon finance managers of various organisations. They have to ensure that the companies are earning reasonable profits and besides that they have to come up with a very appropriate measure to shareholder value. ...
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