The study is motivated by interesting reality that not all corporations are earning and yet these corporations have stockholders and investors who are bought still by the investors. It is said that finance theory makes the valuation of stocks in terms of discounted estimated cash flows. Although profitability increases the net worth of corporations certain accounting conventions computes income not purely on a cash basis but also on an accrual basis. The result of this study will at least provide an answer to the interesting events in the life of a corporation.
The significance of knowing the relationship of the corporate returns as may be expressed in ratios would lend a hand to decision-makers in adopting the major decision of buying or selling a stock. On the part of the seller, he would know when he decides to sell his holding of stock while on the part of the buyer estimates when to buy stocks in the market. In business, timing is important for at certain points in time decisions must be made. A corporation has life and many events could happen that could affect the stockholders and the corporation in terms of stock as far as the general public is concerned. Knowledge of the principles when to sell and when to buy stocks in the stock market or anything like selling the whole in many fields of business is what keeps intelligent entrepreneurs from the rest. It is that they call in business separate the best from the average. Economies all over the world are flooded with much information but corporate executives process only relevant information for certain types of business decisions. For purposes of investment decisions, are there really things which much be taken into consideration. The writer of this dissertation believes it can at least help decision-makers by properly defining some relevant things or variables for consideration.
There is also such a thing decisions based on gut feel where decisions seemed to be inspired by outside sources and some businessmen are really the same instead of the scientific way that is on the basis of evidence. This piece aims to apply science as an alternative to the use of gut feel.