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Valuations are ultimately determined by buyers and sellers. If nobody is buying or selling stock, then any valuation doesn't hold much weight.
by xyzzy4 11y ago
Valuations are ultimately determined by buyers and sellers. If nobody is buying or selling stock, then any valuation doesn't hold much weight.
- huac 11y agoeh, but any attempt now gets at what a company's 'underlying value' is - the discounted value of its expected future cash flows
- shalmanese 11y agoThat's a wonderful standard to aspire to but not always realistic. Say you're trying to take out a loan with your house as the security. The bank can't force you to sell your house just to obtain a valuation, they have to estimate it via indirect means and shit goes really wrong if they get that number systematically wrong. Most consumers are only used to dealing with relatively liquid assets (apart from their house) but businesses deal with illiquid assets as a matter of course and appropriately valuing them is both routine and hugely important.