Read the following case and write whether you think that their opinion is valid and why.

Valuation of a Company

There are definitely factors that company's stock prices that could be affected internally and externally in valuing the company. Some of the value matches of the financial statement that causes differences are because of the book value and market value. Investors must be aware that a company's book value is not the same as its market value. A company's book value measures their assets they hold minus depreciation. Also intangible assets are such as goodwill, brand name; management skill and R&D are not in consideration in the book value. Market value is the value that investors are willing to pay to the company's market share. This value can be approached by putting into consideration the assets that the company holds plus their future investments. There are also others ways to evaluate a company's financial statements as well depending on the situation. "Companies must compete for investors who are willing and able to invest in the company's business models". There many different types of ratios that can be evaluated to find out the financial strengths such as Economic value added (EVA), return on assets, Return on equity, return on capital, price-earnings ratio, current ratio and much more. These ratios can be used to measure how the company is doing as a whole.

In many companies top managements compensation are determined by how well the company is performing. So when these senior managers make their decisions to maximize the stock value, investors do tend to wish to make a quick buck in the short term, but this picture is all wrong. Most of the investors are looking to maximize long term free cash flow. In order for CEO's to understand the stock market sets price and help with investor relations they should consider these three salient points: value of the business is present value of future cash flows, stock markets cash flow is a long-term oriented goal and the market pays for value creation. It is understandable that managers will try to take shortcuts and fudge with accounting numbers to make investors happy but this will only hurt the firm in the long run. Top executives and managers must understand that the adding value to the company in the long-term will be much more beneficial for the company as well as keeping investors. "Valuation Approaches and Methods exploring valuation techniques requires an understanding of the tools available" (What is a Company Worth?