The market value of an enterprise depends on many reasons. Cost estimates can change dramatically. This process is influenced by various economic and political factors.
Market value of the enterprise (object)
The market value of an enterprise (or its market capitalization) is defined as the market sum of all of its shares listed on the market. For a shareholder intending to receive income from the sale of shares in an object, this assessment is the most important. The process of changing the value is influenced by various economic (book value, profit, dividends) and political factors.
The market accepts any information related to the enterprise (for example, it can be information about the expected drought or about a scandal related to the activities of the management). Such information can dramatically change its assessment by the market, its shares can significantly decrease in price. But only the information provided about the object on the market is clearly not enough, it is necessary to apply other actions that will reflect the real processes taking place there.
Market value can be expressed as the sum of value added and capital employed over a specified period. The type of value added is the ratio of its cost to the cost of capital, which is determined by dividing the cost of debt (borrowed capital) and equity capital by the cost of the invested one.
Factors affecting the value of the object
The cost of the evaluated object on the market can be expressed in the form of a calculated indicator, and its market price - as a result of bargaining, the type of economic activity of the enterprise, the solvency of a potential buyer, the presence of other investment objects, etc. The cost is determined by profitability and profitability, socio-economic significance, uniqueness and other characteristics of the products, as well as by the work performed and the services provided.
The value results are based on the value of the share price, which reflects the market expectations of its future performance. Changes in share prices (followed by changes in added market value) determine the results of the company's management in this direction. There are many important factors that prevent the stock price from being used as the primary measure of value creation. The price level in the market can change and affect all courses. Changes in product prices can also affect the amount of capitalization.
