Is business Valuation Necessary?

Valuation in finance means finding out worth of a business, stock, product, customer, or particular segment or division of a company. The Business Valuation means that how much a business is worth to a company. Companies value their customers, their products, divisions and segments to see if it is profitable to be in that product or segment or is it contributing negatively to the profits of the company.

Business Valuations are primarily needed before acquiring a business, merging a business, making an investment, or starting a new business. The business valuation is very important for the investors since it gives an idea to the investor that the business will give him positive and competitive return compared to the investment opportunities. The public companies are valued on their financial statements issued by the management, which an independent auditing body audits.

The company’s valuation for the purpose of mergers and acquisition are done by seeing the company’s cash flows, liabilities, its assets, net pool of equity, brand name, companies R&D, market share in the industry, and its future growth prospects. All these factors are given a somewhat monetary value that analysts expect that company will give in future and these values are then discounted to the present values and the net value of the company is found. The commonly used three methods to value businesses include a comparable company analyses, discounted cash flow analysis, and transaction analysis. These provide a holistic value to the company as a whole.

The stock investors also value the companies since the returns of the stocks also depend on what the company is valued at. The business is valued, and using the valuation the company’s stock price is found. If the company stock is traded below the calculated price then the stock is undervalued, and it is a promising investment opportunity since general investors, when realize that the stock is undervalued, they will start buying it which will correct the mispricing and the investor who invested when the stock was undervalued would gain a good return out of it. The value investors believe that the market is inefficient and the mispriced securities can be found in the market, and they analyze the financial statements and the growth prospects of the company and find out the value of the company.

Apart from these reasons business valuation is necessary because the management/owner can put the company’s resources in the right opportunity. Businesses are in constant flux. The economic conditions, industry, and the economy, all are changing and the efficient use of resources is very important for a business to thrive and prosper. Current business valuations give management ideas, which businesses have more value in terms of future growth and prospects etc., and which is a lost cause and is negatively impacting or might impact negatively on the company’s overall profits. Using valuation analysis the management can decide as to what to divest in the business and where to invest and focus more.

How to choose the best dividend stock

While looking at any stock it is very important to look at its dividends, as it is the income that you are going to get in cash for the upcoming period. When you are looking for stock dividends the first thing to note is consistency in that dividend, the focus should be on stocks which have given good and consistent returns in past. Another aspect to look for is the amount of dividend with respect to price-to-dividend, as it will show the percentage of price that company is paying in the form of dividends. There are companies which have a history of paying dividends from which we can decide what we can expect from that stock. There are also some companies, which do not offer any dividends at all, e.g. Apple has never given out anything in dividends. Normally the companies which are growing will offer low dividends as they will be investing most of earnings for growing their business but on the other hand the companies which are in mature stage are more likely to offer dividends because these companies have already reached the saturation stage and there aren't any further growth opportunities that's why these mature companies are likely to offer more consistent stock dividends. One of the best options available is Utilities industry; this industry has achieved the stage where there is no or very little opportunity to expand any further.

If you are looking for long-term investments you should definitely look at dividend paying stocks, as this will ensure a constant income stream for you. It will give some money that you can use without selling the stock. If you are going to invest in a stock with dividends there is also a good news for you that this will have two features: it will provide you dividends which would be like coupon payment for bonds, and secondly, it will appreciate its value like other stocks that means investing in dividend stock is a win-win deal.

If you are looking for best dividend stocks, then what you have to look at is what type of industry do you want to invest in, and for dividend stocks you will have to look for mature and stable industries. These industries can give you better dividends as they don’t have to invest much for growth opportunities and can disperse their income for their investors. You have to go through technical analysis what the firm has done in past and what amount it is giving out in future. High dividend stocks will also ensure that you will continuously get income that you can use. For high dividend stocks, utilities industry is a very good option as this industry has saturated and has low risks. Therefore, it is highly likely that they will continue to get steady flow of income and these companies don’t have to invest much for growth so they will give most of the income out as dividends to their investors.

Earning More Income from Solid Dividend Paying Stocks

With the increasing trend shown by interest rates it has been observed that investors are looking everywhere for stocks with stable returns. Many stocks have changed the trends and now are not that profitable as they used to be. While looking for any kind of investment there are different things to look at to pick a good stock. There are different strategies to pick stocks. One of the most straightforward strategies to look at is steady stream. While thinking about steady income one will always think about fixed income securities like bonds. But there are some stocks, which can offer steady dividends and also give some handsome return.

If you are looking for steady returns in stocks you should focus on solid dividend paying stocks. In order to look for these stocks the focus should be towards older, mature and more established firms, which have attained a certain level and can no longer sustain higher growth levels. These companies are not much expanding now like other growing companies, which are investing their retained earnings into themselves, but these mature firms are passing over their earnings to their investors and are paying some good dividends.

Dividends are more common in few industries like utilities, which have a record to pay decent dividends in past many years and will continue to do so in coming future. Here I am going to discuss three stocks, which are expected to pay solid dividends in coming time.

Matt Frankel: It is business development company and provides services to private businesses. It has to pay most of its earnings to avoid corporate taxation. Prospective yield is around 12.2%, which is the type of yield shown by REITs with some inconsistencies lately. Unlike other stocks, it is paying monthly dividends and is also increasing its dividend slightly every month. Prospect has also taken steps to diversify its portfolio in order to minimize its risk. It is expected that with these new additions company would be able to give better and steady returns in future as well.

Patrick Morris: New York Community Bancorp has been one of the most consistent dividend payers since 1994. It has paid dividend every quarter since 1994 and is paying $0.25 per quarter since last 40 quarters. Although investors don’t like much to invest in banks but this one is an exception because of its dividend paying history. In addition to 6% yield the management of this bank has done a great job in investing in less risky but highly profitable multi-family and commercial industries. It has done an amazing job in managing its costs and attaining such level of efficiency.

Jordan Wathen: The third one on the list is also a business development company. This company is also a very good option for steady returns. The most attractive things about this firm are its cost structure and capital structure. It has utilized its resources very well and has achieved a great level of efficiency. With all this, it is a very good option to invest for gaining stable and long-term dividends.

How to Be a Successful Investor in Stocks

An investor is someone who obligates investment in order to gain monetary yields. Investors, either are standing or prospective, are usually categorized as Institutional or Retail. The institutional investors are the investors who succeed a group of possessions into which individuals or other investment firms jointly capitalize. They contain venture capital trusts, unit trusts, mutual funds, pension plans, and life assurance. Such investors are categorized based on the investment type or each of the investor’s smartness, and it is significant to differentiate between such various styles as each seeks an exclusive value intention. On the other hand, the Retail Investors are those who may or may not be skilled and proficient, but may vary in speculation styles. Some may pursue income, though others look for significance. Their existence is vigorous in any shareholder base as they deliver liquidity to the marketplace.

To become a successful investor in long term investing stock one should keep following course of actions in mind; “Buy low and sell high”, this is a vibrant bit of help but accomplishing this objective can be more problematic than it might seem and this simple rule can be very easy to overlook. In order to "buy low" and "sell high", it is sometime crucial to do the contradictory of what the common investors appear to be doing. Apparently effectively, investing in stocks is to pick funds to buy that will rise in value over time and then ultimately sell the stock at a greater price. Secondly, “Recognize and realize whatever you are purchasing” as an investor; it is a worthy idea to have a consideration of the company you are purchasing shares of its stock and be capable to list compact reasons for why you think the company’s incomes will increase over period. Also “Tolerance is a virtue”; occasionally an investor can be accurate about the stock he or she has acquired but wrong on the timing as to when it was credited. A stock might go down after it is purchased, but eventually go way up in price thereby producing a handsome profit. Moreover, "Don’t blur a bull market for mastermind”; when assets are going prosperous and flourishing in the stock market it is a good idea for investors to stay uncertain about their stock selection skills.

A bull market increases the stock price of most companies. The common trend of the market may be more behind an investor's present success than his or her skill at assortment stocks. Furthermore, “Dividends are important”; Extras and Surpluses can play a substantial role in relation of one’s success in capitalizing in stocks. Companies that pay payments incline to be more established and have even earnings than companies that do not pay a dividend. Another important quality to dividends is that they can rise over time and can come to epitomize a very important component of the benefit of having invested in a specific stock. Finally to become a smart investor “Don't yield a vast loss”, an additional bit of principal guidance, measured the extreme investor in contemporary times, to make sure to avoid taking a big loss. If an investor drops half of his money on a bad investment judgment then he/she must double his/her outstanding money to get back to level.

Stocks made Simple

Most of the people think that it is very difficult to invest in stocks and only those with heavy knowledge about stock market can invest but it is not true. Now it has become very easy to invest in stocks, with websites like bidnessetc.com coming in it is now very simple to make a stock investment. You just need to go to this site and it will give guide you through the whole process of your investment. It has all the updated prices, all the stock market news and forecasts about different stocks. This website has made stock investment very simple for any stock investor. Even if you are new to this business this website will be very useful to you.

It has all the articles presented in an interesting and humorous way; it has animated characters and different type of displays to amuse you along with guidance. It is very difficult for a common man to interpret financial ratios and other financial indicators. For example debt to equity ratio wouldn’t make sense to common man and it is very necessary to translate this into understandable language. Similarly if things are explained in finance terms only this will complicate things for a common man, it is very important to have such information, which everyone can understand. Bidnessetc.com has very simple way of explaining things and any person can understand those things. If you are new to stock investment and don’t know much about stock market then do visit bidnessetc.com.

You can easily do a fundamental analysis of a stock based on the available information, you need to estimate the cash flows of coming year based on the information available. You have all the sales and expenses data and company’s capital structure is given, it is very easy to estimate the cash flows of the company. These cash flows are projected at a certain growth rate to an indefinite period of time, discounted value of these cash flows will give the current value of the firm. You also need to pay attention to key financial health indicators; one of the widely used indicators is z-score. Z-score assigns values based on 5 different factors. You need to pay close attention to ratios like asset turnover, inventory turnover and cash cycle etc. If company has a large inventory turnover it is not a good indicator and the operating risk of the company will go up which means the total risk of that company stock will also be higher. Similarly if cash cycle of a company is very weak means it is very difficult for company to manage cash for its regular operations, this will also add to the total risk of the company. If a company has a very high debt to equity ratio this will substantially increase the financial risk of the company, high debt means the company has a high amount that it has to pay to debtors in any case. This adds to the bankruptcy and agency costs.