Thanks to visit codestin.com
Credit goes to www.scribd.com

Scribd
Upload
5 views1 page

Finman

The document discusses the concepts of current market price and intrinsic value of stocks, explaining how they are determined by supply and demand and the company's profitability, respectively. It highlights the importance of stock equilibrium and reasons why stocks may not be in equilibrium, as well as the significance of intrinsic value for stockholders. Additionally, it references the Enron scandal and the Sarbanes-Oxley Act aimed at improving corporate accountability, and outlines recommendations for CEO compensation based on performance metrics.

Uploaded by

Rin Akaashi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
5 views1 page

Finman

The document discusses the concepts of current market price and intrinsic value of stocks, explaining how they are determined by supply and demand and the company's profitability, respectively. It highlights the importance of stock equilibrium and reasons why stocks may not be in equilibrium, as well as the significance of intrinsic value for stockholders. Additionally, it references the Enron scandal and the Sarbanes-Oxley Act aimed at improving corporate accountability, and outlines recommendations for CEO compensation based on performance metrics.

Uploaded by

Rin Akaashi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 1

Sophia S.

Catuiran BSA 3

ASSIGNMENT
1. Current market price is the current price of the stock in the stock exchange. It is determined by supply and
demand. If the demand to buy is increasing, the price also increases and if the demand to sell increasing, the
price decreases. The prices can change frequently and short term due to the changes of demand and supply.
Intrinsic value is the price of the stock based on the company’s profitability and growth over time. It is based on
the company’s revenue and earnings, cash flow and economic decisions. It is usually calculated using different
models, the Dividend Growth Model for example, where the value of a stock is the present value of the future
dividends expected to be generated by the stock. The value of the stocks are subjective, different analysts may
arrive at different intrinsic values. In summary, Current market price shows what investors are paying and
intrinsic value shows what a stock is worth.
2. Stock equilibrium occur when current market price is equal to its intrinsic value.
Why stocks are not in equilibrium:
 Asymmetric Information
 Company’s value is unclear
 Not enough buyers and sellers
 Short term thinking of traders

3. Stockholders would want managers to maximize the firm’s intrinsic value rather than its market price since
the intrinsic value reflects the company’s true worth on its ability to generate profit and grow. Market price may
not reflect the actual strength of a business since it can be influenced by temporary trends and it ignores long
term sustainability

4. Enron Corporation was an energy company in the U.S. that collapsed in 2001 due to accounting fraud. They
used fake companies to hide debt and make the company look more profitable. Sarbanes-Oxley Act of 2024 was
created to prevent fraud like Enron by making companies and their executives more accountable and
transparent. this act helps prevent scandals like Enron by reducing risk of biased and dishonest financial
reporting and it improves transparency and ethics.

5. I would have the most confidence in Company X’s CFO. As the CFO he has direct access of the company’s
financial data and can have the most accurate and reliable information about the company’s ability to generate
profit, its growth, and how they handle risk.

6. If I were a member of Company X’s Board of Directors and chairperson of the compensation committee, I
would recommend that the CEO’s compensation be based on a mix of fixed salary and performance-based
incentives. The fixed salary gives the CEO steady income, and the extra pay would encourage the CEO to do a
better job and help the company grow. To measure performance, I would check things like the company’s
profits, sales, and how satisfied the employees and customers are. If I were also a vice president in the same
company, I would be extra careful with my decisions. I would make sure everything is fair and that I do what’s
best for the company.

You might also like