The Importance of Company Valuation to Investor, the Shortcoming of Literature review

The Importance of Company Valuation to Investor, the Shortcoming of DCF Mode - Literature review Example An example of an investor who hugely benefits from company valuation is one who reinvests dividends. By this kind of re-investment, such an investor could build wealth for myriad uses such as retirement benefits. However, the core importance of company valuation to investors is that it allows them to know the value of a company and its assets before investing (Copeland et al., 2000). Familiarity with the value of a company and its assets is quite important for investors’ intelligent decision making, more so for deciding the most appropriate prices to pay or receive during a takeover (Pratt, 1998). Additionally, valuation helps investors to choose the right investment portfolio and sound financing and dividend choices when running a business. Valuation also helps investors make reasonable estimates of the values of real and financial assets. Company valuation also ensures that an investor does not pay more for an asset than its real worth. Therefore, valuation plays several cri tical roles in acquisition analysis, corporate finance, and portfolio management (Pratt, 1998). Efficient Market Hypotheses Is Not Trustable Many researchers, scholars and investors have theoretically and empirically criticized and disputed the efficient-market hypothesis. At the forefront in criticizing the efficient-market hypothesis are behavioral economists who assert that combinations of cognitive biases are responsible for the deficient nature of Efficient Market Hypothesis (EMH) (Gaughan, 2004). These cognitive biases include overreaction, information bias and representative bias, predictable human errors of reasoning, information processing errors and overconfidence. The alleged reasoning errors have been observed to drive many an investor to buy excessively expensive growth stock while avoiding value stock (Hitchnera, 2006). On the other hand, those reasoning correctly buy and profit from the neglected value stock and the overreacted selling of growth stocks. In a similar m anner to theoretical evidence, practical evidence fault the efficient-market hypothesis, For example, while some behavioral economists assert that low P/E stocks have greater returns, others tend to differ, attributing these higher returns to higher beta (?) (Gaughan, 2004). In fact, the latter group’s researches have been accepted by efficient market theorists as adequately explaining the irregularities according to the modern portfolio theory. That stock buyers often operate on and are driven by irrational excitement implies that a lot of speculative economic bubble anomalies are encountered in the markets since such buyers do not detect the underlying values of stocks (Gaughan, 2004). After these economic bubbles, there is always an overreaction and frantic effort to sell stocks to unscrupulous investors who then buy these stocks at bargain prices. Further, since markets may remain irrational for a longer duration than expected, even rational investors could encounter diff iculties to operate profitably since they may be forced to shorting irrational bubbles since they are no longer able to remain solvent over the period (Gaughan, 2004). The Limitations of Net Asset Valuation Model Once a company gets solvent, it may decide to pay its creditors, sell its assets

Strategic human resource management Essay Example | Topics and Well Written Essays - 1000 words

Strategic human resource management - Essay Example Human resources of a company are the most valuable and important assets.The terms Human resource management deals with a wide range and dimension of people. Human resources form the heart of every company The various skills as well as the motivation of the individuals help each individual enhance their performance and together they work towards achieving the goals of the organization. Human resource management is a very crucial part of any business and the human resource managers play a crucial role in the overall success of the business as well (Armstrong). This paper aims at discussing the role of HR in strategic planning of an organization as well as how the human capital planning has an impact on the overall business planning. The next section will briefly deal with the strategic role of HR. Strategic Role of HR: Human Resources Management is one of complex nature and the skills of the people in the organizations are very different and varied. Hence due to complex nature of the s kills and the people HR is more a strategic function than anything else (Carlie). The strategic planning of an organization depends on the Human Resources Management to a great extent, as HRM plays an important role throughout the life span of an employee in the organization, including recruitment, training, development and retention. It has been noted in the current times that the role of the HR is more strategic in nature than the traditional approach. There are mainly two areas that the HR tends to follow, i.e. the overall performance of the company and the role of the HR in terms of solving and resolving the business problems. Hr focuses more so on the overall issues and performance of the company than the performance of individuals and the individual roles (Noe, Hollenbeck and Gerhart). With the intense levels of competition, strategic human resource management involves management of available resources both for short as well as long term goals of the organisation. Business str ategy has been defined as game plan of the management and business strategies have been recognised to be the main source that allows better usage of all resources within the business. In the current time where competition is at its peak, it is clear that every business wishes to use all of its resources to the maximum and to benefit the most of all the resources (Carlie). Strategically using the resources to gain optimum utilisation of the resources is referred to as strategic human resource management. It is crucial that these strategies are in sync with the overall business strategy to create a well balanced business including all aspects like finance and marketing. Importance of HR: Effective human resources management is an important element of business in the current time. The success or failure of a business can clearly be based on the competencies and the attitudes of the human resources of a company and it is now becoming imperative for businesses to attract, retain and also nurture good talent (Noe, Hollenbeck and Gerhart). Currently the boundaries of human resources are clearly being defined by innovativeness and proactive. It is now evident that the success of a business is more so based on the human resources rather than simply wealthy physical resources. The quality of the human resources has become a major element for the overall success of the businesses and also the nation as well. With the intensive growth of technology and the high levels of globalization, it is clear that the businesses are now more knowledge and information based, service oriented, customer centric and competitive. Success of any business is clearly dependent on the level of dynamics of the business and it is here that the human resourc