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BRILLIANT’S Long Term Financing and Valuation of Goodwill & Shares 187

growth of a company but it builds a good im- amoH$ gH$Vr h¡ {H$ÝVw ¶h B§doñQ>g© H$s Ñ{ï> ‘| EH$ AÀN>r
age in the eyes of investors, particularly, those N>{d ~ZmVr h¡ {deof ê$n go Omo B§H$‘ ñQ>m°³g ImoOVo h¢
seeking income stocks, thereby raising its de- {OgHo$ Ûmam BgH$s ‘m§J VWm ‘yë¶ ~‹T>Vm h¡& EH$ [aQ>ob
mand and value. A retail investor, who is risk
averse, always keeps his eyes on the earnings B§doñQ>a Omo Omo{I‘ Zht boZm MmhVm h¡ h‘oem A{Zª½g VWm
and returns. [aQ>Ýg© na ܶmZ XoVm h¡&
5. Financial Ratios: A company which has 5. ’$m¶Z|{e¶b aoemo… EH$ H§$nZr {OgH$m Am¡Úmo{JH$
good financial ratios as compared to the indus- Am¡gV H$s VwbZm ‘| AÀN>m ’$m¶Z|{e¶b aoemo h¡ CgHo$
trial average will have a higher value of shares. eo¶g© H$m A{YH$ ‘yë¶ hmoJm& Bg g§~§Y ‘| ‘hÎdnyU© aoemo
The important ratios in this regard are debt
equity ratio, return on capital employed, re- S>oãQ> B[³dQ>r aoemo, à¶w³V H¡${nQ>b na [aQ>Z©, B{³dQ>r na
turn on equity etc. [aQ>Z© Am{X h¢&
6. Management: A company which is well 6. ‘¡ZoO‘|Q>… EH$ H§$nZr {OgH$mo AÀN>r Vah à~§Y
managed has a better value of its shares. If the {H$¶m J¶m h¡ CgHo$ eo¶g© H$m AÀN>m ‘yë¶ hmoVm h¡& ¶{X
resources are efficiently utilized, then the earn- g§gmYZm| H$m Hw$ebVm go Cn¶moJ {H$¶m OmVm h¡ Vmo grYo
ings increase directly. A{Zª½g ~‹T>Vr h¡&
7. Strong Asset Base: A company which 7. gwÑ‹T> AgoQ> AmYma… EH$ H§$nZr {OgH$m AgoQ>
has a strong base of asset commands a good H$m EH$ gwÑ‹T> AmYma hmoVm h¡ eo¶g© Ho$ AÀN>o ‘yë¶ na
value of shares. The assets owned by the com- {Z¶§ÌU aIVr h¡& H§$nZr Ho$ ñdm{‘Ëd Ho$ AgoQ²>g H$m
pany have its impact on the profitability or bm^Xm¶H$Vm VWm A{Zª½g na ^r à^md hmoVm h¡& CXmhaU
earnings also. For example, If a company is
Ho$ {bE, ¶{X EH$ H§$nZr H$m {demb b¢S> ~¢H$ hmoVm h¡ (O¡go
having huge land bank (like Bombay Dyeing)
then the value of shares may be high inspite of ~m°å~o S>mB§J) Vmo eo¶g© H$m ‘yë¶ A{Zª½g Ho$ ~mX ^r A{YH$
low earnings. In fact, the strong asset base may ahVm h¡& dmñVd ‘| gwÑ‹T> AgoQ> ~og H${R>Z g‘¶ ‘| H§$nZr
help the company to combat in difficult times. H$mo g§Kf© H$aZo ‘| ghm¶Vm H$a gH$Vm h¡&
8. Bonus and Right Shares: A company 8. ~moZg VWm amBQ> eo¶g©… EH$ H§$nZr Omo {Z¶{‘V
that has been giving regularly right shares and ê$n go amBQ> eo¶g© VWm ~moZg eo¶g© XoVr ahr h¡ CgHo$
bonus shares has a higher value of its equity B{³dQ>r eo¶g© H$m A{YH$ ‘yë¶ hmoVm h¡& dmñVd ‘| ‘yë¶
shares. In fact, the value tends to be higher
Cg g‘¶ A{YH$ hmoVm h¡ O~ amBQ> ¶m ~moZg Kmo{fV
around the time when the right or bonus is
likely to be announced. For example 'Colgate hmoZo H$s g§^mdZm hmoVr h¡& CXmhaU Ho$ {bE, 'H$mobJoQ>
Company' is famous for high rate of dividends H§$nZr' {S>{dS>|S²>g H$s CÀM Xa ¶m ~ma-~ma ~moZg Ho$
and frequent bonuses. {bE à{gÕ h¡&
9. Present earnings: The present earnings 9. dV©‘mZ A{Zª½g… EH$ H§$nZr H$s dV©‘mZ A{Zª½g
of a company significantly impact the value of eo¶g© Ho$ ‘yë¶ H$mo ‘hÎdnyU© ê$n go à^m{dV H$aVr h¡ &
shares when a company comes out with good
results, the price shoots up. But, this change O~ EH$ H§$nZr AÀN>o n[aUm‘m| Ho$ gmW AmVr h¡ Vmo ‘yë¶
may be temporary. ~‹T>Vm h¡ {H$ÝVw ¶h n[adV©Z AñWm¶r hmo gH$Vm h¡&
10. Restrictive covenants: If a company is 10. [apñQ´>{³Q>d H$modZ|Q²>g… ¶{X EH$ H§$nZr {H$gr
bound by some legal covenants and restrictive brJb H$modZ|Q²>g VWm [apñQ´>{³Q>d ³bm°Oog go ~§Yr h¡ Vmo
clauses, the value of shares is bound to be low. eo¶g© H$m ‘yë¶ H$‘ hmoVm h¡&