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Michael Matheis
BUSI 690
Liberty University
7 May 2015
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Valuation is defined as a method of calculating value of companies and their
stock. We as humans created in God’s image have stock. According to Brealey, Myers,
and Marcus, “when financial analysts need to value a business, they often start by
identifying a sample of similar firms. They then examine how much investors in these
companies are prepared to pay for each dollar of assets or earnings” (p.191). Similar to
companies when we accept Christ our stock rises and we become an attractive investment
to others looking at us.
The valuation of a company starts by comparing the company and its prospects to
similar companies. The book value of a company is defined as “the difference between
the value of the assets and the liabilities” or simply the “net worth of the firm according
to the balance sheet” (Brealey, Myers, & Marcus, 2011, p. 189). Analysts can compare
the market-to-book ratios and Price-Earnings ratio (P/E) to estimate the value of a
company compared to similar companies (Brealey et al, 2012). Analysts use the dividend
discount model to forecast all future dividends paid by the company (Brealey et al, 2012).
According to the dividend discount model, the predicted future value of the stock and the
dividends may increase to give a higher stock price, as well as a lower discount rate
(Brealey et al, 2014). Economic value that is created gives somewhat of a way an
organization can be measured for a competitive advantage against its competitors.
According to Osterwalder and Pigneur, the customer segment is when an
organization services just one or several customers. Value is just that because is defined
by the customer. Channels are the means in which value is delivered the customer i.e.
sales and communication. Customer relationship is established in the segment portion and
is vital to the entire process. Customers are the main focus of the business model due to
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their purchasing power. Organizations make products in response to feedback from
consumers. The age old statement of “the customer is always right” rings true in this case.
Not listening to the customer needs can prove vital.
Government plays a part due to the fact that they regulate the way products are
produced, packaged, shipped and sold. This affects the cost of the goods produced.
Companies looking to create revenue would be served best to adhere to the government
regulations to avoid from heavy fines as well as avoiding being shut down.
Competitors play a part because organizations are always trying to keep a
competitive advantage in the market. According to Rothaermel, “an action by a key
competitor may impact the organization’s strategy just as its business strategy may force
a reaction by a key competitor” (p. 30).
Deuteronomy 30:19, 20 states “this day I call heaven and earth as witnesses
against you that I have set before you life and death, blessings and curses. Now choose
life, so that you and your children may live and that you may love the LORD your God,
listen to his voice, and hold fast to him. For the LORD is your life, and he will give you
many years in the land he swore to give to your fathers, Abraham, Isaac and Jacob.” We
represent the “market value”. The market value is based on what investors are willing to
pay for shares. Some internal factors that a company can control that affect the price of a
company’s stock include the strength of the company’s financial statements, the ability of
the company to increase its dividend (if the company pays a dividend), the future growth
potential of the company in regards to increased market shares. From a Christian
perspective, our stock value is tied to the strength of our faith. The more we grow in our
faith, the more others invest in you spiritually.
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The external factors, that a company cannot control, that affect a company’s stock
price include the value that investors are “willing to pay for each dollar of assets or
earnings” (Brealey, Myers, & Marcus, 2011, p. 191). No matter how much you
fellowship or service others, people are going to invest what they want into you and your
beliefs. You cannot expect others to be “all in” because you are. In the body of Christ we
all don’t share the same vision. We may arrive at the same destination, but the road
travelled may be totally different.
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Reference
Brealey, R. A., Myers, S. C., & Marcus, A. J. (2012). Fundamentals of corporate finance
(7th ed.). New York, NY: McGraw-Hill Irwin.
Osterwalder, A. & Pigneur, Y. (2010). Business model generation. Hoboken, NJ: John
Wiley & Sons.
Rothaemel, F. (2013). Strategic management: Concepts & cases. New York: McGraw-
Hill Irwin.
The Holy Bible: New international version, containing the Old Testament and the
NewTestament. (1978). Grand Rapids: Zondervan Bible Publishers.
