Application of shareholder value maximization framework, Financial Management

Application of Shareholder Value Maximization Framework

 

Factors affecting Shareholder's Value are:

  • Capital Market Conditions
  • Profitability à Includes factors like Sales Turnover and Profit Margin
  • Risk
  • Growth

Assessing these factors for the company gives us a framework on which one can base a buying/selling criterion for the company's stock.

  1. Profit: If a company has been showing an increase in its profit margin for the past years, and there is still scope in this respect as the company is now increasing its product range and with demand expected to remain due to its market. Hence the positive '+' rating.
  2. Risk: The risk factor for any company is always a matter of subjectivity. Hence the neutral rating 'O'.
  3. Growth: Potential for growth is always there for a company in this field. 
  4. Capital Market Conditions: Capital market conditions are quite unpredictable and with the ever-changing global scenario it is quite difficult to gauge this properly. Hence the neutral 'O' rating.

 

 

 

Posted Date: 7/25/2012 8:51:19 AM | Location : United States







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