Internal and External Factors
Several factors, both internal and external, impact a company’s stock price and the subsequent
perceived valuation of a company. Sometimes that perceived value matches that of the financial
statements, and other times it is vastly different. Therefore, discuss the factors that lead to a
valuation of a company’s worth compared to that of the financial statements and how company
executives create the most value for all stakeholders.
Your thread is due by 11:59 p.m. (ET) on Thursday of Module/Week 3. Your replies are due by
11:59 p.m. (ET) on Sunday of the same module/week.
Discussion Board Forum #2
Busi 530
Liberty University
A company’s stock can create hype because of how sensitive the value can be to various
factors. In order to make the right choice when deciding to either “buy” or “sell”, there are
certain factors that an observant investor should be aware of when evaluating a company’s stock.
New Strait Times lists some of these crucial factors that can impact a company’s stock price;
Supply and Demand, Economic Situation, Company Performances, Market Rumors, and even
Political Instability. For the first factor, investors will need to be familiar with a company’s
supply and demand to determine if the product is in high demand. If so, then it would result in
the stock prices increasing until it reaches a mutual settlement. Following is the “economic
The value of a company can be measured in various ways. This discussion forum will
discuss several, internal and external, factors that can directly impact a company’s stock, leading
to a company’s worth, and how company executives can create value for all stakeholders.
Valuation of a Company
situation” factor, where the company’s stock market performance is known as the “leading
indicator” of where the market expectations will be in a few months.
The next factor for investors to look into is the “Company Performance”. This factor
demands investors to pay attention and learn the company’s “business fundamental” because this
would influence the stock price in the long run. New Strait Times states about this factor, “As an
investor, you should be mindful of the company’s business direction and projects that it is
involved in, that have the potential of bringing growth to the business”. According to this factor,
investors would also need to keep an eye on the company’s financial performance and
management strengths to make a good investment decision.
The last two factors are Market Rumors and Political Instability. Market Rumors can be
a major contributor to short term volatility because of the panic that can stem from investors
trying to sell based on negative rumors. Lastly, Political Instability factors is based on the
country’s stability. If the country is facing instability, it can result in investors reacting
negatively by pulling out their funds from all parties. To avoid triggering panic, investors will
determine if this instability is a short-term vs long-term event.
These are only a few listed factors for investors to be familiar with and use in
determining the purchase of a company’s stock. Also, it is important for investors to remember
to understand and evaluate a company’s situation before making any sort of investing decisions.
In determining the company’s stock worth, there are two listed reasons; 1) investors “may need
to value the common stock of a business that is not traded on a stock exchange” 2) Some of
Brealey, R. A., Myers, S. C., & Marcus, A. J. (2015). Fundamentals of corporate finance with
Connect (8th ed.). Boston, MA: McGraw-Hill.
New Straits Times (Malaysia). (2009, March 25). What Causes Stock Prices to Move? New
Straits Times (Malaysia). Retrieved from LexisNexis Academic.
these valuations are focused around the book values and market values of a company. By doing
so, investors must first understand the difference between the two. “Book values are based on
historical or original values. Market values measure current values of assets and liability”
(Brealey, Myers, and Marcus, 2015).
Conclusion
Overall, there will always be internal and external factors that can and will impact a
company’s stock price and valuation. With company’s financial statements, not only can it
obtain stakeholder’s interest but it will provide the foundation of determining the company’s
value. Ultimately, it is up to the company’s executives to be honest and keep the stakeholder
informed on the company’s finance position and management for the long run.
