Corporate Valuation
Essay Preview: Corporate Valuation
Report this essay
CORPORATE VALUATION: DETERMINANTS OF CORPORATE VALUE
The value of public companies is determined by the stock market. The value of companies not publicly quoted will be greatly influenced by the same market.
Therefore, we will focus on the main stock-market-related ratios.
They are:
Market Capitalization
Share values, nominal, book, market
Earnings Per Share (EPS)
Dividends Per Share (DPS)
Dividend Cover and Pay-Out Ratio
Earnings Yield
Dividend Yield
Price To Earnings Ratio (PE)
Market To Book Ratio
Below is the balance sheet for Dandy Fashion Berhad:
Dandy Fashion Berhad
BALANCE SHEET AS AT 31 DECEMBER 2006
($000,000s)
Assets
Liabilities & Shareholders Equity
Long Investment $ $
Owners Funds $ $
Net Fixed Assets 440
Issued Capital 80
Investment 40
Capital Reserves 60
Revenue Reserves 220
Long-Term Loans 200
Current Assets
Current Liabilities
Inventory 128
Short-Term Loans 60
Accounts Receivables 160
Accounts Payable 140
Cash 20
Miscellaneous 40
Miscellaneous 12
TOTAL ASSETS 800
TOTAL LIABILITIES & SHAREHOLDERS EQUITY 800
Assumptions:
Issued Capital: 32,000,000
Nominal (par) value of $2.50
Book (asset) value of $11.25
Market value of $22.50
Profit and Loss Account For Year Ended 31 December 2006
($000,000s)
Sales1,120
PBIT 112
Interest
PBT 92
PAT 60
Common Dividend
RE 36
RATIOS:
Book Value Per Share (also known as asset backing)
Number of common shares = 32,000,000
Total owners funds = $360,000,000
Book value per share