Benjamin Graham, the father of value investing, once said, "In the short run, the market is a voting machine, but in the long ru
n, the market is a weighing machine." In this quote, Benjamin Graham was referring to the key difference between the "price" and the "value" of a security. In November 2006, Citigroup's stock (NYSE: C) was trading at $49.59. Following the credit crisis of 2007-2008 and by the end of October 2009, Citigroup's stock price had plummeted to $4.27. Several banks went under, and others saw their stock prices lose more than 60% of their value. Based on your understanding of stock prices and intrinsic values, which of the following statements is true? a. A stock's intrinsic value is based only on the perceived risk of a stock.
b. A stock's intrinsic value is based on true investor returns.
Which of the following describe the reason(s) why maximization of intrinsic stock value benefits society.
a. Most investors prefer companies that can rise prices beyond reasonable levels.
b. Successful companies can avoid raising external funds in the financial markets.
c. successful companies higher more employees.
d. stock price maximization requires efficient, low-cost businesses.
1- a. A stock's intrinsic value is based on true investor return.
2- a. Most investors prefer companies that can rise prices beyond reasonable levels.
b. Successful companies can avoid raising external funds in the financial markets.
Explanation:
Intrinsic value of a company's stock is the real value of stock which is based on systematic factors affecting the company. The factors affecting the intrinsic value of company are usually internal factors. The performance of company management, employee satisfaction and its operational efficiencies are the factor which drive intrinsic value of a company.
Because Participative leadership is a managerial style that invites input from employees on all or most company decisions. The staff is given pertinent information regarding company issues, and a majority vote determines the course of action the company will take.
Revenue is the business operational source of finance. IFRS has made standards for revenue recognition which need to be followed by all organizations. The revenue should be calculated after deducting trade and cash discounts. If there is any sales return it should be deducted from the gross revenue figure. Net revenue should be reported in the Income Statement.
