RE: Discussion Board 2 Kevin Linhart

RE: Discussion Board 2 Kevin Linhart

I agree with Kevin’s statement that financial statements provide only a partial look at the picture when valuing a company. While providing the financial data such as sales, expenses, gross profit, total assets and liabilities, and net worth it leaves out the internal influences that most influence the bottom line.

Kevin is correct in stating that war, natural disaster and terrorism are all world events that influence the value of a company’s stock. In fact, war is one of the number one stimulants of the national economy. Shown to repeat itself is the pattern of a rising economy immediately after the onset of war (Suroweiki, 2003). Days after the bombing in Tokyo in 1942, the economy, which had dropped drastically after the raid on Pearle Harbor began to turn upward where it rose 15% in 1942 and again in 1943. The pattern repeated in 1950 and 1951 following a recession in 1949. War with Korea again stimulated the economy by roughly 8% for two years in a row, and again during early Vietnam (2003).

I agree to some degree that mergers, acquisitions, hiring and firing of company executives, and allegation of fraud can affect stock price, however, I believe that this affect is minimal and over is gradual. A more direct influence to share value is that of dividends and share bonuses. Dividends, often interpreted as being a direct measure of a company’s profitability when paid by to shareholders, although technically taking from net profit, in effect raise the value of its shares. The only downside to this is while your share value rises, your net profit is lower .

Share bonuses are similar to dividends except in lieu of cash for dividends you receive more shares. The downside to this is th...

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..., J. (2003, March 10). The wages of war. The New Yorker. Retrieved from http://www.newyorker.com/archive/2003/03/10/030310ta_talk_surowiecki

Works Cited

Akhigbe, A. (2010). Dividends still don't lie: The truth about investing in blue chip stocks and winning in the stock market. American Journal of Business, 25(2), 71-72. Retrieved from http://search.proquest.com/docview/763130446?accountid=12085

Dandes, R. (2010). Measure for Measure -- Maximize Value Form Your Incentive Program. Retrieved from http://www.pipmag.com/feature_print.php?fid=201005fe04

Riordan, M. (2005). No monopoly on innovation. Harvard Business Review, 83(12). from http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=18916317&site=bsi-live

Suroweiki, J. (2003, March 10). The wages of war. The New Yorker. Retrieved from http://www.newyorker.com/archive/2003/03/10/030310ta_talk_surowiecki