Need DQ Answer 300 words and apply the answer as IT Manager how stock validation is helpful.

Running head: STOCK PAGE 1

STOCK VALUATION PAGE 2

Stock

Student’s Name: Sivaranjani Mandarapu

Institution: Westcliff University

Stock Valuation

Stock is very important in the running of the business. The stock acts as the security that shows the ownership of the business and therefore, valuing a stock remains to be very significant. My best way of valuing a stock is by the use of balance sheet analysis, whereby to determine the value of the stock, the total liabilities are deducted from the sum of total assets (“Chapter 6. Fundamentals: Balance Sheet Tests You Need To Know,” 2017). The benefits of using the balance sheet analysis to value the stock is that it summarizes all the company’s assets and liabilities which makes the method to be more efficient and accurate to use and therefore becomes easy to determine the value of the stock.

In addition, the price-to-earning P/E ratio is another method that can be effectively used to value a stock. This method of valuing a stock is performed by dividing the value of the stock by the total earnings per share of the company (Risdanya & Zaroni, 2016). The earnings of the investor are dependent on the price-to-earnings ratio, whereby the higher P/E ratio is characterized by less earning power and more time taken for the stock to pay the investors their money.

Also, another method to value a stock is the price/sale ratio, in which the company’s markets cap by the company’s totals of annual returns (Tanius & Widjojo, 2018). The price/sale ratio entirely depends on the revenue of the company and therefore it is more effective for online retailer companies that do not have consistencies in terms of profitability.

In conclusion, there are a lot regarding valuing a stock rather than just crunching the amounts quoted. Qualitative factors that are directly related to the competitive analysis of the company for example the intangible assets are supposed to be factored in the approach used to value a stock.

Reference

Chapter 6. Fundamentals: Balance Sheet Tests You Need To Know. (2017). Stock Market Math. doi:10.1515/9781501507427427-006

Risdanya, M., & Zaroni, Z. (2016). Pengaruh Net Profit Margin, Earning Per Share, Return On Equity, Price Earning Ratio, dan Debt To Equity Ratio terhadap Harga Saham. Jurnal ULTIMA Accounting, 7(2), 53-74. doi:10.31937/akuntansi.v7i2.181

Tanius, G. I., & Widjojo, R. (2018). The Influence of Price/Earning Ratio (PER), Price to Book Ratio (PBR) and Price to Sales Ratio (PSR) on Net Asset Value (NAV) in Sharia Equity Fund. Jurnal Manajemen dan Bisnis Indonesia, 6(1), 91-102. doi:10.31843/jmbi.v6i1.185