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                  190                               Corporate Finance                      BRILLIANT’S


                      The Assets Backing Method is generally      AgoQ²>g ~¢qH$J {d{Y H$mo gm‘mݶV… {ZåZ n[apñW{V¶m|
                  applied under the following circumstances:  ‘| à¶w³V {H$¶m OmVm h¡…
                    For  formulating  schemes  of  amalgam-     EH$sH$aU ¶moOZm ~ZmZo Ho$ {bE&
                      ation.
                    For acquiring majority of the shares and    eo¶g© H$s ‘oOmo[aQ>r àmá H$aZo VWm H§$nZr Ho$ {Z¶§ÌU
                      controlling the company.                    Ho$ {bE&
                    In the event of liquidation.                O~ {b{³dS>oeZ hmoVm h¡&
                  B. Yield Valuation Method                   B. ¶rëS> d¡ë¶yEeZ {d{Y
                      This method is also known as Market Value   Bg {d{Y H$mo ‘mH}$Q> d¡ë¶y {d{Y ^r H$hm OmVm h¡&
                  Method. The word "yield" means a rate of re-  ''¶rëS>'' eãX H$m AW© àmá H¡$e (¶m àmßV hmoZo H$s
                  turn relating cash invested to cash received (or  Anojm) Ho$ {bE {Zdoe {H$¶o J¶o H¡$e go g§~§{YV [aQ>Z© H$s
                  expected to be received).                   aoQ> h¡&
                      Yield may be "Earning Yield" or "Dividend   ¶rëS ''A{ZªJ ¶rëS>'' ¶m ''{S>{dS>|S> ¶rëS>'' hmo
                  Yield".                                     gH$Vm h¡&
                      (i) Earning Yield: If a company distributes  (i) A{ZªJ ¶rëS>… ¶{X EH$ H§$nZr BgHo$ g^r bm^
                  all of its profits as dividends, it cannot grow  H$mo {S>{dS>|S²>g Ho$ ê$n ‘| {dV[aV H$aZm MmhVr h¡ Vmo ¶h
                  and can never be in a position to increase its  d¥{Õ Zht H$a gH$Vr h¡ VWm BgHo$ {S>{dS>|S²>g ~‹T>mZo H$s
                  dividends.                                  pñW{V ‘| Zht hmo gH$Vr h¡&
                      Therefore, a shareholder will have inter-   AV… EH$ eo¶ahmoëS>g© H$s [aQ>oÝS> àm°{’$Q²>g Ho$ gmW-
                  est both in the retained profits as well as dis-  gmW {S>pñQ´>ã¶yQ>oS> àm°{’$Q²>g XmoZm| ‘| ê${M hmoJr& Bg {d{Y Ho$
                  tributed profits. Under this method, shares are  A§VJ©V, H§$nZr H$s ^{dî¶ H$s Am¶ ³¶m hmoJr BgHo$ loð>
                  valued on the basis of the earnings expected by
                                                              g§Ho$VH$ Ho$ ê$n ‘| {nN>bo df© H$s Am¶ Ho$ EH$ Am¡gV H$m
                  using an average of  recent year's earning as
                  the best indicator of what future earnings of  Cn¶moJ H$aHo$ A{ZªJ E³gno³Q>oS> Ho$ AmYma na eo¶g© H$m
                  the company will be  value of each share calcu-  ‘yë¶m§H$Z {H$¶m OmVm h¡& à˶oH$ eo¶a H$m ‘yë¶ {ZåZ{b{IV
                  lated by applying the following formula:    gyÌ à¶w³V H$aHo$ JUZm {H$¶m OmVm h¡…

                                                  Expected Rate of Earning (ERE)*
                                 Value per Share                               F.V. of Share
                                                   Normal Rate of Return (NRR)
                      Where, F.V. = Face value.

                                                                      Profit After Tax
                                  * Expected Rate of Earnings (ERE)                    100
                                                                 Paid-up value of shares
                      (ii) Dividend Yield: There may be circum-   (ii) {S>{dS>|S> ¶rëS>>… n[apñW{V¶m§ hmo gH$Vr h¢ Ohm§
                  stances where the shareholder has little or no  eo¶a-hmoëS>g© H$m {S>{dS>|S> nm°{bgr na Wmo‹S>m ¶m {~ëHw$b
                  influence over dividend policy. In such cases, it  ^r à^md Zht hmoVm h¡& BZ n[apñW{V¶m| ‘| A{Zª½g H$s
                  may be more appropriate to value the shares  Anojm {S>{dS>|S²>g Ho$ AmYma na eo¶g© H$m ‘yë¶m§H$Z A{YH$
                  based on dividends than earnings.           Cn¶w³V hmoVm h¡&
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