Characteristics of Companies with Financial Prowess

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Characteristics of Companies with Financial Prowess
The internet has revolutionized information exchange. This disruptive technology improved availability of information to the individual investor. Prior to the internet, the investment world was driven by brokers and financial institutions. The playing field has vastly expanded. Individuals are now investing with the aid of technology. Having more players with access to a firm’s financial information, has given rise to increased scrutiny surrounding financial performance. Financial reporting provides a window into how a firm performs. The internet has expanded who is capable of peeking inside. This increased speed in information has raised the volatility around stock pricing (Schmidt, 2011) and enhanced the world of “stock-picking” (Fuhrmann, 2012).
Technology has allowed greater access to information (including misinformation). The use of financial indicators helps identify successful companies. This practice has been in effect for many years. Indicators such as return on equity (ROE), earnings and earnings growth are common place when valuing a firm. These common indicators can be used to identify sound investment opportunities. Understanding how investors evaluate a firm is critical to the firm optimizing value and meeting stakeholder’s expectations.
This analysis will evaluate two successful firm’s Abbott Laboratories (ABT) and Wal-Mart (WMT). It will identify common characteristics utilized by these two firms in support of improved value. The discussion will center on a firm’s financial reporting and how earnings generated can be used for increasing value.
Assessment
Financial performance is the predominant predictor used by investors. Financial indi...

... middle of paper ...

...ntice Hall.
Fuhrmann, R. (2012, February 6). How the internet has changed investing Investopedia, Retrieved from http://www.investopedia.com/financial-edge/0212/how-the-internet-has-changed-investing.aspx
Graham, J. (2000). How big are the tax benefits of debt?. In The Journal of Finance. Retrieved from http://onlinelibrary.wiley.com/doi/10.1111/0022-1082.00277/abstract
McRoberts, F. (2002, September 1). The fall of andersen. Chicago Tribune. Retrieved from http://www.chicagotribune.com/news/chi-0209010315sep01,0,2011837,full.story
Schmidt, M. (2011, November 5). The financial characteristics of a successful company. Investopedia, Retrieved from http://www.investopedia.com/articles/stocks/08/successful-company-qualities.asp
Yahoo finance. (2014). Retrieved from http://finance.yahoo.com/q?s=ABT
Yahoo finance. (2014). Retrieved from http://finance.yahoo.com/q?s=WMT

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