Posted: April 25th, 2025

classmates Discussion Thread Valuation Factors

 DISCUSSION ASSIGNMENT INSTRUCTIONS
you must reply to at least 2 classmate’s threads. Each reply must be at least 150
words. For each thread, you must support your assertions with at least 2 citations in current APA
format. Each reply must cite at least 1 source and include biblical integration. Acceptable sources
include the textbook, the Bible, and scholarly, peer-reviewed journal articles. Standard & Poor’s

Roy W

Financial statements, when reported accurately, provide a picture of past performance of the financial health of a company, as we discussed during the first week of class. However, there are many other indicators that outline the perceived value of a company. Some concepts that are not reflected in financial statements but are important to a company’s perceived value are brand reputation and customer loyalty. “Brand reputation refers to how consumers perceive a specific brand based on its image, values, and performance. It is a critical factor that influences consumer behavior and drives the success of a business. A good reputation establishes trust, credibility, and loyalty among customers, while a negative reputation can tarnish a company’s image, causing it to lose credibility and sales.” (Agility PR Solutions, 2024) Not only does it affect consumer sales, but a poor brand reputation can affect a company’s ability to attract solid talent when recruiting which could lead to stagnation. A good brand reputation could also play into investor sentiment. An example of this would be an inflated company stock price that does not reflect its actual value. There are additional factors that affect a company’s perceived worth that are not in its control like market competition, increased lending rates, or poor economic conditions.

Executives attempt to create long-term value to improve value for stakeholders. Strategic planning toward consumer relations, innovation to combat economic change and competition, and achieving financial results are among their most important responsibilities. An article from the Harvard Business School states, “Creating value in business exceeds stakeholders’ minimum expectations. The amount expectations are exceeded—financial or perceived—is the amount of value created. There are three sources of value creation: Beating the cost of capital, continuing to beat the cost of capital and growth.” (Business Insights, 2024)

References:

Agility PR Solutions. (2024, October 10). https://www.agilitypr.com/pr-news/public-relations/brand-reputation-in-focus-why-it-matters-what-factors-impact-it-how-to-measure-it-and-how-it-drives-success/

Business Insights Blog. (2022, April 26). https://online.hbs.edu/blog/post/how-do-businesses-create-value

Tessa H

               Investors and other stakeholders often perceive a company as more or less valuable than what is indicated by the financial statements. A company’s actual value may differ from its book value due to a variety of factors. Contrary to what some investors might initially believe, the process of valuing a business and determining the value of an owner’s interest concerns more than just the activity of selling (Barbour, 2024). In order to create the most value for a company’s stakeholders, executives must “maximize their business development efforts” and pursue that which brings the most value to the 
structure of the business (Barbour, 2024, p. 110). Thus, company valuation is not simply a surface-level activity. Merely perusing a company’s balance sheet and income statement may grant an idea of the company’s immediate business activities and operational success. However, a multitude of other internal and external factors impact a company’s actual valuation. Brealey et al. (2023) identify three cores factors which influence stakeholders’ perception of a company. These factors include extra earning power, intangible assets, and the value of future investments (Brealey et al., 2023). When company executives can derive more earnings than the required rate of return, this creates intrinsic value for stakeholders (Revsine et al., 2021). Intangible assets, such as research and development initiatives and business expertise, create value for stakeholders (Brealey et al., 2023; Barbour, 2024). Thus, company executives with a wealth of practical business experience can create more value for a company than what appears on the financial statements. In addition, a company’s perceived liquidity and external industry conditions greatly affect stakeholder perceptions (Sohdi, 2024). Investor predictions about future industry events can greatly affect stock prices and perception of company value in the present. Lastly, executives can create value through responsible, profitable investments. Growth companies show remarkable promise, and companies which properly utilize investment opportunities can significantly boost future earnings (Brealey et al., 2023). In these ways, executives can increase the value of their company and, thus, stock prices.

              When business analysts and other professionals seek to make reasonable estimates of a company’s actual value, they are concerned with fair value and not only what appears on the financial statements. Barbour (2024) identifies the usefulness of industry-specific ratios, diverse quantitative and qualitative data, and unique characteristics of intangible assets. While difficult to quantify, unrecorded assets such as brand name, recognizability, and consistent degree of quality provide companies with distinct competitive advantages within the industry (Revsine et al., 2021). This is particularly evident when examining the triumphant success of streaming companies. In their article, Brösel et al. (2023) describe the unique advantages of streaming companies and platforms. The authors cite three essential steps to value such companies, but this process can certainly apply to companies in all industries. First, an investor must determine relevant data which can be used to predict future performance. An investor must then analyze this data and transform it into a subjective decision value. A final comparison of this subjective decision value to objective prices informs an investor’s ultimate valuation of the company (Brösel et al., 2023). This aligns with Brealey et al.’s (2023) identification of valuation factors, as a company’s ultimate valuation depends on more than just quantitative items from the financial statements. Titus 3:5 demonstrates this concept through a biblical lens. This verse affirms that God “saved us, not because of righteous things we had done, but because of his mercy” (
New International Version, 2011/1978, Titus 3:5). Just as God looks at more than a person’s own works when He shows mercy, company stakeholders look at more than the numbers on the financial statements when determining the value of a company.

References

Barbour, T. (2024). BUSINESS VALUATIONS: Appraising & enhancing a company’s worth. 
Alaska Business Monthly, 40(10), 110–115. https://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=180061853&site=ehost-live&scope=site

Brealey, R. A., Myers, S. C., & Marcus, A. J. (2023). 
Fundamentals of Corporate Finance (11th ed.). New York, NY: McGraw-Hill Education.

Brösel, G., Wasmuth, J., & Dechant, H. (2023). Determinants in the Valuation of Streaming Companies and Streaming Platforms. 
European Journal of Studies in Management & Business, 
28, 39–56. https://doi.org/10.32038/mbrq.2023.28.03 (https://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=175420481&site=ehost-live&scope=site)

New International Bible. (2011). The NIV Bible. https://www.thenivbible.com (Original work published 1978).

Revsine, L., Collins, D. W., Johnson, W. B., Mittelstaedt, H. F., & Soffer, L. C. (2021). 
Financial Reporting and Analysis (8th ed.). McGraw-Hill Education.

Sohdi, L. R. (2024). The Influence of Growth Rate, Profitability, Liquidity, and Company Valuation on Stock Price. 
Jurnal Riset Akuntansi Dan Bisnis Airlangga (JRABA), 9(1), 1–23. https://doi.org/10.20473/jraba.v9i1.56477. (https://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=178791711&site=ehost-live&scope=site)