Reflection on Financial Concepts
During my first semester, our professor taught us about the factors associated with shareholder values and the management of the share market. Therefore, factors associated with the shareholder values were described to us with the reference of different theories and models. Moreover, the factors associated with the share market and the development were improved with the explanation of our professors. Professors analysed different concepts like equity of shareholders, minus liabilities retained earnings and some of the company’s net income.
In this reflection, Gibb’s cycle of reflection has been used.
During the initial days of class, I was very confused as I did not have much idea about the shareholder’s value and importance in the economic sectors. Metrics were related to the effective interpretation of equity owners and capital gains. On the other hand, topics of different types of shareholder values and related metrics are the concepts that seemed very difficult for me. Earnings, cash flow, and increased sales are the benefits gained by the shareholders’ value in the marketplace (Miglietta, Battisti and Garcia-Perez, 2018). I was interested enough to participate in the class and to improve my knowledge about the matter. However, our professor gave me the chance to clear all my doubts during the class.
Shareholders’ value can increase the total amount of stakeholder’s equity section on the development of the balance sheet in the marketplace. Companies related to the capitals used the shareholder values by buying and using different assets. Well managed companies can compensate the firms with smaller investment assets with better management of cash flows (HBR, 2021). Earnings per share of the company are related to the cumulative earnings of shared values with common stock outstanding (Gilles and Yaffe-Bellany, 2019). With the increased earnings of the company, the ratios of the shareholder values also increase. During the classes, our professor also told us about an important concept called the maximisation myth of shareholder value. In that myth, it was described that the corporate and shareholders and organisations should maximise profits for the shareholders’ value. The professor also described the reason behind the myth was due to an outdated judgement and misinterpretation of the verdict by the Michigan Supreme Court in 1919.
On the contrary, the value metrics uncovered the stocks in an undervalued market Investors. The stock metrics would improve stock price movement and the company’s long-term fundamentals in the financial marketplace. Investors were given the opportunities while the price was deflated in the market. Value investors can turn the financial ratios and the company’s fundamentals (HBR, 2021). Therefore, value metrics are related to price to earnings ratio, price to book ratio, debt to equity ratio, PEG ratio, and free cash flows in the company scenarios and in the market development of economic sectors (Alsoboa, 2017). All the metrics were mentioned and described by the professor so that our knowledge and understanding would be associated with the shareholder values. However, I had various confusions about the metrics, but he analysed the details of the metrics thoroughly, which was enough for me to understand most of them.
With the description of my professor, stock metrics’ importance could be understood properly. These metrics cannot determine the effects of shareholders’ value in the economic market properly. The shareholder metrics would be related to the purchase qualifies for the companies. The fundamental factors related to the stock market would improve good prices and improved values in earning for a better stock valuation in the market. The quality of the companies would affect the comprehensiveness, and financial reporting’s in the company scenario (Harvard Business Review, 2021). Shared value-added would help to improve short-term returns on the benefits of long-term effects. Revenue growth, market equity, and factors associated with share markets have very different effects on the shareholder’s values in the market for the management of finance.
Shareholder theory is one of the most important theories in the financial market; therefore, the traditional purpose of the organisation for maximum possible results would help improve the management for the board of directors. According to the theory, the corporation cannot involve any kind of philanthropy. But the company should provide the values in the development of shareholders’ values for dividends. The finance theory describes that the economic values should be measured with the right measurements with the reflection of risks in the framework (Clarke, Jarvis and Golshani, 2019). The value for money and the balance of profit and loss solely depend on factors associated with the shareholders’ value and the frameworks related to the trade-offs. Agency theory would be helped to improve the factors associated with the impacts of different corporations. Both the theories were clearly analysed with the help of our professors.
Ingrained ways of thinking would be related to the experiences and practice in financial development. Shareholder’s value would fail to improve willingness and of the company for the development of returns in the sales. The shareholder’s values would help to improve the understanding of different concepts related to the market analysis and change of markets. The financial theories are related to the factors for the development of financial benefits in the market analysis (Harvard Business Review, 2021). On the other hand, information goals and misalignments for the development of market equity. Shareholder value creation and return on capital are the factors associated with accounting earning and investment capital. The professors improved the knowledge of concepts and understanding of the objectives (Miglietta, Battisti and Garcia-Perez, 2018). Invested capital and timing differences are the factors for capital markets, institutional investors and corporate governance. Greater attention to the market values could influence the factors associated with market capital.
We could understand that implementation of EVA and expected management in the financial evaluation would help to improve different factors. Pertinent information and capital markets identification could help to improve the net present value (NPV) by us (Gilles and Yaffe-Bellany, 2019). The success of primary factors in the market leadership could be analysed with an explanation of different priorities and understanding. On the contrary, there were different types of strategic principles explained by the shareholders. These principles of different strategic values are related to maximising the expected values in lowering near-term earnings (HBR, 2021). The maximisation of different values could be used by making acquisitions at the expense of lowering the near-term earnings. It has been understood that for better value-creation potential with additional capital. Therefore, I could understand the mix of investment in operating units in mixed investment marketing. The professors’ explanation would help to improve financial management.
The financial analysis would help to improve the effectiveness of concepts and understanding among us. Through the classes, it could be understood that the factors associated with the Shareholder value-added theory can be understood with the help of hands-on experience for the practice.
In future, I would like to take more classes on the concepts of shareholders values to improve my understanding. The concepts and understanding would also be very clear for me after I would get more training on this concept only. I would like to improve my practical skills to calculate the values of different metrics. In addition to that, future development programs would help to improve my concepts.
Also boat, S.S., 2017. The influence of economic value-added and return on assets on created shareholders value: A comparative study in Jordanian public industrial firms. International Journal of Economics and Finance, 9(4), pp.63-78.
Clarke, T., Jarvis, W. and Gholamshahi, S., 2019. The impact of corporate governance on compounding inequality: Maximising shareholder value and inflating executive pay. Critical Perspectives on Accounting, 63, p.102049.
Gelles, D. and Yaffe-Bellany, D., 2019. Shareholder value is no longer everything, top CEOs say. The New York Times.
HBR, 2021. Managing for Shareholder Value—From Top to Bottom. [online] Harvard Business Review. Available at: <https://hbr.org/1989/11/managing-for-shareholder-value-from-top-to-bottom> [Accessed 20 November 2021].
Miglietta, N., Battisti, E. and Garcia-Perez, A., 2018. Shareholder value and open innovation: evidence from Dividend Champions. Management Decision.
Harvard Business Review, 2021. Ten Ways to Create Shareholder Value. [online] Harvard Business Review. Available at: <https://hbr.org/2006/09/ten-ways-to-create-shareholder-value> [Accessed 20 November 2021].