Company Financial

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All the above factors have to be in alignment with the ultimate objective of any business, maximising profits and wealth. “According to this concept, actions that increase the firm’s profit are undertaken while those that decrease profit are avoided”.Equity Evaluation: the term equity evaluation can be simply termed as the value of stock owned by a company. It is this value which will reflect the profitability and investment possibilities in the company. Stock evaluation is usually done using value of future earnings in current terms which are then adjusted with the expected future growth. But what would happen in case a company is planning to issue more shares or if the company is being sold or merged with another company? Both these scenarios have been mentioned as possibilities at an earlier stage in this paper. There are basically six factors that reflect on stock value. The first one is the rate at which the firm is growing. Then comes a study of the dividends paid by the company in the past. The next factor is the current rate of return on stock. This is followed by a valuation of current and future earnings. The tax structure of the company has to be calculated. The last on is the directions of the government on this matter. There are two popular methods for stock valuation. The more widely accepted method is the Residual Income Method. The other method of valuation is through Cash Flow Analysis. This is due to the fact that the future though predicable, is uncertain and that the figures used may turn out to be in variance with the realities of the future.Payout of Dividend: Dividend is the method through which a company’s stockholders are rewarded for buying stocks in the firm. For this to happen the company should have enough earnings to show reasonable profit. The rate of dividend that a company has paid will reflect on the valuation of its stock. Here