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Market Value Added
Market value added (MVA) is the difference between the current market value of a firm and the capital contributed by investors. If MVA is positive, the firm has added value. If it is negative, the firm has destroyed value. The amount of value added needs to be greater so than the firm's investors could have achieved investing in the market portfolio, adjusted for the leverage (beta coefficient) of the firm relative to the market. Basic formula The formula for MVA is: : MVA = V - K where: * ''MVA'' is market value added * ''V'' is the market value of the firm, including the value of the firm's equity and debt * ''K'' is the capital invested in the firm MVA is the present value of a series of EVA values. MVA is economically equivalent to the traditional NPV measure of worth for evaluating an after-tax cash flow profile of a project if the cost of capital In economics and accounting, the cost of capital is the cost of a company's funds (both debt and equity), or from an inv ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Market Value
Market value or OMV (Open Market Valuation) is the price at which an asset would trade in a competitive auction setting. Market value is often used interchangeably with ''open market value'', ''fair value'' or ''fair market value'', although these terms have distinct definitions in different standards, and differ in some circumstances. Definition International Valuation Standards defines market value as "the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion". Market value is a concept distinct from market price, which is "the price at which one can transact", while market value is "the true underlying value" according to theoretical standards. The concept is most commonly invoked in inefficient markets or disequilibrium situations where prevailing market prices are ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Capital (economics)
In economics, capital goods or capital are "those durable produced goods that are in turn used as productive inputs for further production" of goods and services. At the macroeconomic level, "the nation's capital stock includes buildings, equipment, software, and inventories during a given year." A typical example is the machinery used in factories. Capital can be increased by the use of the factors of production, which however excludes certain durable goods like homes and personal automobiles that are not used in the production of saleable goods and services. Adam Smith defined capital as "that part of man's stock which he expects to afford him revenue". In economic models, capital is an input in the production function. The total physical capital at any given moment in time is referred to as the capital stock (not to be confused with the capital stock of a business entity). Capital goods, real capital, or capital assets are already-produced, durable goods or any non-fi ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Investor
An investor is a person who allocates financial capital with the expectation of a future Return on capital, return (profit) or to gain an advantage (interest). Through this allocated capital most of the time the investor purchases some species of property. Types of investments include Stock, equity, Bond (finance), debt, Security (finance), securities, real estate, infrastructure, currency, commodity, Exonumia, token, derivatives such as put and call Option (finance), options, Futures contract, futures, Forward contract, forwards, etc. This definition makes no distinction between the investors in the primary and secondary markets. That is, someone who provides a business with capital and someone who buys a stock are both investors. An investor who owns stock is a shareholder. Types of investors There are two types of investors: retail investors and institutional investors. Retail investor * Individual investors (including Trust law, trusts on behalf of individuals, and umbr ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Beta Coefficient
In finance, the beta (β or market beta or beta coefficient) is a measure of how an individual asset moves (on average) when the overall stock market increases or decreases. Thus, beta is a useful measure of the contribution of an individual asset to the risk of the market portfolio when it is added in small quantity. Thus, beta is referred to as an asset's non-diversifiable risk, its systematic risk, market risk, or hedge ratio. Beta is ''not'' a measure of idiosyncratic risk. Interpretation of values By definition, the value-weighted average of all market-betas of all investable assets with respect to the value-weighted market index is 1. If an asset has a beta above (below) 1, it indicates that its return moves more (less) than 1-to-1 with the return of the market-portfolio, on average. In practice, few stocks have negative betas (tending to go up when the market goes down). Most stocks have betas between 0 and 3. Treasury bills (like most fixed income instruments) a ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Ownership Equity
In finance, equity is ownership of assets that may have debts or other liabilities attached to them. Equity is measured for accounting purposes by subtracting liabilities from the value of the assets. For example, if someone owns a car worth $24,000 and owes $10,000 on the loan used to buy the car, the difference of $14,000 is equity. Equity can apply to a single asset, such as a car or house, or to an entire business. A business that needs to start up or expand its operations can sell its equity in order to raise cash that does not have to be repaid on a set schedule. In government finance or other non-profit settings, equity is known as "net position" or "net assets". Origins The term "equity" describes this type of ownership in English because it was regulated through the system of equity law that developed in England during the Late Middle Ages to meet the growing demands of commercial activity. While the older common law courts dealt with questions of property title, equit ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Debt
Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. Debt is a deferred payment, or series of payments, which differentiates it from an immediate purchase. The debt may be owed by sovereign state or country, local government, company, or an individual. Commercial debt is generally subject to contractual terms regarding the amount and timing of repayments of principal and interest. Loans, bonds, notes, and mortgages are all types of debt. In financial accounting, debt is a type of financial transaction, as distinct from equity. The term can also be used metaphorically to cover moral obligations and other interactions not based on a monetary value. For example, in Western cultures, a person who has been helped by a second person is sometimes said to owe a "debt of gratitude" to the second person. Etymology The English term "debt" was first used in the late 13th century. The term "debt" comes ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Net Present Value
The net present value (NPV) or net present worth (NPW) applies to a series of cash flows occurring at different times. The present value of a cash flow depends on the interval of time between now and the cash flow. It also depends on the discount rate. NPV accounts for the time value of money. It provides a method for evaluating and comparing capital projects or financial products with cash flows spread over time, as in loans, investments, payouts from insurance contracts plus many other applications. Time value of money dictates that time affects the value of cash flows. For example, a lender may offer 99 cents for the promise of receiving $1.00 a month from now, but the promise to receive that same dollar 20 years in the future would be worth much less today to that same person (lender), even if the payback in both cases was equally certain. This decrease in the current value of future cash flows is based on a chosen rate of return (or discount rate). If for example there exists ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Cost Of Capital
In economics and accounting, the cost of capital is the cost of a company's funds (both debt and equity), or from an investor's point of view is "the required rate of return on a portfolio company's existing securities". It is used to evaluate new projects of a company. It is the minimum return that investors expect for providing capital to the company, thus setting a benchmark that a new project has to meet. Basic concept For an investment to be worthwhile, the expected return on capital has to be higher than the cost of capital. Given a number of competing investment opportunities, investors are expected to put their capital to work in order to maximize the return. In other words, the cost of capital is the rate of return that capital could be expected to earn in the best alternative investment of equivalent risk; this is the opportunity cost of capital. If a project is of similar risk to a company's average business activities it is reasonable to use the company's average cost ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Financial Markets
A financial market is a market in which people trade financial securities and derivatives at low transaction costs. Some of the securities include stocks and bonds, raw materials and precious metals, which are known in the financial markets as commodities. The term "market" is sometimes used for what are more strictly ''exchanges'', organizations that facilitate the trade in financial securities, e.g., a stock exchange or commodity exchange. This may be a physical location (such as the New York Stock Exchange (NYSE), London Stock Exchange (LSE), JSE Limited (JSE), Bombay Stock Exchange (BSE) or an electronic system such as NASDAQ. Much trading of stocks takes place on an exchange; still, corporate actions (merger, spinoff) are outside an exchange, while any two companies or people, for whatever reason, may agree to sell the stock from the one to the other without using an exchange. Trading of currencies and bonds is largely on a bilateral basis, although some bonds trade o ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
