University of the PeopleFINANCIAL BUS 5111discussion assignment 5

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Please describe market capitalization as a valuation method, what are strengths and weaknesses? Then, please discuss book value as a valuation method. Compare it to market capitalization. Market Val... ue Market Capitalozation as a valuation method is using compamy market value as valuation. Company market price is determined by many factors include the demand and supply, this price is set per shares. As any other commodities, there is always uncertianity or stability in market price, there are a lot of factors that makes price flunctuate but downward and upward. Among of this factors are (1) new techbology, social -economic , company financial standing, government regulation e.t.c. To get company market valuation, the number of traded shares is multiple by the price per unit of share. It is quite common to see the book value and market value differ significantly. The difference is attributed to several factors, including the company's operating model, its industrial sector, the nature of a company's assets and liabilities, and the company's specific attributes. Market Value Limitations “While market cap represents the market perception of a company’s valuation, it may not necessarily represent the true picture” (Seth 2019). It is common to see even mega-cap and large-cap stocks moving 3 to 5 percent up or down during a day’s session. A stock often gets overbought or oversold, and relying solely on market cap valuations may not be the best method to assess a stock’s realistic potential. Advantages It is straightforward and involves simple calculations. It uses data that is real and public. It is not dependent on subjective forecasts. Disadvantages It is difficult to identify transactions or companies that are comparable. There is usually a lack of a sufficient number of comparable companies or transactions [Show More]

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