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The Importance of Company Valuation to Investor, the Shortcoming of DCF Mode - Literature review Example

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Author : gkuvalis
Literature review
Finance & Accounting
Pages 5 (1255 words)


The Importance of Company Valuation to Investor, the Shortcoming of DCF Mode, Residual Earning Model, Z Score Model and Net Asset Valuation Model, EMH (Market is Not Efficient) By [Name of Student] [Name of Institution] [Word Count] [Date] The Importance of Company Valuation for Investors For some investors, uncertainty and risk often have the same meaning…

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The Importance of Company Valuation to Investor, the Shortcoming of DCF Mode

An example of an investor who hugely benefits from company valuation is one who reinvests dividends. By this kind of re-investment, such an investor could build wealth for myriad uses such as retirement benefits. However, the core importance of company valuation to investors is that it allows them to know the value of a company and its assets before investing (Copeland et al., 2000). Familiarity with the value of a company and its assets is quite important for investors’ intelligent decision making, more so for deciding the most appropriate prices to pay or receive during a takeover (Pratt, 1998). Additionally, valuation helps investors to choose the right investment portfolio and sound financing and dividend choices when running a business. Valuation also helps investors make reasonable estimates of the values of real and financial assets. Company valuation also ensures that an investor does not pay more for an asset than its real worth. Therefore, valuation plays several critical roles in acquisition analysis, corporate finance, and portfolio management (Pratt, 1998). ...
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