Provide a narrative that compares market capitalization, book value, future earnings methods, and other methods mentioned) with each other.
Market Capitalization: The market capitalization calculation is most important and useful stock valuation formula for investment analysis.
Market Capitalization (market cap) it is calculated by multiplying a company's shares outstanding by the current market price of one share. The investment community uses this figure to determine a company's size, as opposed to using sales or total asset figures
For instance, a company has 25 million outstanding shares and the
current market price of each share is Rs100. Market capitalization
of this company will be 250,00,000 x 100= Rs 250 crore.
There are of three types of Stocks in companies.
Book Value: Companys book value or net worth is the share holders equity in the balance sheet it is also difference betweeen total assets and liabiltites, i.e. surplus of the companys total goods and rights over its total debts with third party
Book value refers to the total amount a company would be worth if it liquidated its assets and paid back all its liabilities. Book value can also represent the value of a particular on the company's assets balance sheet after taking accumulated depreciation into account.
Book value is important such that shareholders will receive that much amount per share if a company is liquidated as on date.
Book value is calculated by taking a company's physical assets (including land, buildings, computers, etc.) and subtracting out intangible assets (such as patents) and liabilities -- including stocks, debts and account payables. The value left after this calculation represents what the company is intrinsically worth.
Book value = total assets - intangible assets - liabilities
Discounted future earnings are a method of valuation used to
estimate a firm's worth. The discounted future earnings method uses
forecasts for the earnings of a firm and the firm's estimated
terminal value at a future date, and discounts these back to the
present using an appropriate discount rate. The sum of the
discounted future earnings and discounted terminal value equals the
estimated value of the firm.
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