Business Valuation Notes
Valuation: Valuation is the process of determining the current worth of an asset or a company; There are many techniques used to determine value. An analyst placing a value on a company looks at the company’s management, the composition of its capital structure, the prospect of future earnings, and the market value of assets.
Share: Shares are units of ownership interest in a corporation or financial asset that provide for an equal distribution of any profits, if any are declared, in the form of dividends. The two main types of shares are common shares and preferred shares.
Efficient market hypothesis: The efficient market hypothesis is the hypothesis that the stock market reacts immediately to all the information that is available. Three forms of the efficient market hypothesis can explain the theory behind share price movements.
Types of efficiencies in the context of the operation of financial markets:
- Allocative efficiency.
- Operational efficiency.
- Informational processing efficiency.