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Essay / Research Paper Abstract
This 5-page paper answers various questions including valuation of a business and components of a job design. Bibliography lists 2 sources.
Page Count:
5 pages (~225 words per page)
File: D0_MTbusiques.rtf
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Most companies are valued via their earnings - earnings are probably the most tangible way in which a company shows whether its profitable (or not,
as the case may be). The tool typically used is called "net income" or "net profit," and its the same thing as earnings; earnings, in their most basic form, is
the money left over after the company pays off its liabilities (Motley Fool, 2008). The typical method of valuing a company
via earnings is first calculate the earnings per share, which is the dollar amount of earnings divided by the number of shares outstanding (Motley Fool, 2008). To examine a companys
earnings relative to its price, the price/earnings ratio (or P/E) is used (Motley Fool, 2008). This is the stock price, divided by the companys previous four quarters worth of earnings
(Motley Fool, 2008). Tbe strengths of a P/E formula are that it provides a decent view of what the market things a
company its worth, relative to its actual earnings. If the market price is close to the P/E, theres little concern that the market is overvaluing the worth of a company
(or conversely, undervaluing it). Furthermore, the P/E provides a decent snapshot of where the companys financial health has been within the
past year (as it evaluates the four previous quarters against the current market price). So theres some historical data to go on with this.
The difficulty with relying on just P/E as a valuation tool, however, is that there is a lot more to the value of a firm, such as equity
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