Financial Performance Rating
For investors, information about the company's financial performance can be used to see whether they will maintain their investment in the company or look for other alternatives. If the company's performance is good, the business value will be high. With a high business value, investors are eyeing the company to invest their capital so that there will be an increase in share prices. Or it can be said that stock prices are a function of company value.
As for the company, the company's financial performance information can be utilized for the following matters (Jenny Chan on “Forensic Accounting Application and the Extenuation of Fraud”):
To measure the achievements achieved by an organization in a certain period that reflects the level of success in carrying out its activities.
Besides being used to see the overall organizational performance, then performance measurement can also be used to assess the contribution of a part in the achievement of overall company goals.
Can be used as a basis for determining the company's strategy for the future.
Give instructions in making decisions and organizational activities in general and divisions or parts of the organization in particular.
As a basis for determining investment policies in order to improve company efficiency and productivity.
Definition, Type and Measurement of Company Value
Company value is investors' perception of the level of success of a company that is often associated with stock prices. High stock prices make the value of the company also high, and increase market confidence not only in the company's current performance but also in the company's future prospects.
Maximizing company value is very important for a company, because maximizing company value means maximizing the company's main goals.
Increasing the value of the company is an achievement in accordance with the wishes of its owners, because with increasing company value, the welfare of the owners will also increase.
Here are some definitions and definitions of company value from several book sources:
According to Sartono (2010: 487), the value of a company is the sale value of a company as a business that is operating. The existence of excess selling value above the value of liquidation is the value of the management organization that runs the company.
According to Harmono (2009: 233), the value of the company is the company's performance which is reflected by the stock price formed by the demand and supply of the capital market that reflects the public's assessment of the company's performance.
According to Noerirawan (2012), the Company's value is a condition that has been achieved by a company as an illustration of public trust in the company after going through a process of activities for several years, ie since the company was founded until now.
According to Brigham and Erdhadt (2005: 518), the value of a company is the present value of free cash flow in the future at a discount rate according to the weighted average cost of capital.
Free cash flow is cash flow available to investors (creditors and owners) after taking into account all expenses for company operations and expenses for investment and net current assets.
According to Gitman (2006: 352), the company's value is the actual value per share that will be received if the company's assets are sold according to the share price.
Types of Company Values
There are five types of company values based on the calculation method used, namely (Yulius and Tarigan, 2007: 3):
Nominal Value. Nominal value is the value that is formally listed in the company's articles of association, explicitly stated in the company's balance sheet, and also written clearly in a collective share certificate.
Market value. Market value is often called the exchange rate is the price that occurs from the bargaining process in the stock market. This value can only be determined if the company's shares are sold on the stock market.
Intrinsic Value. Intrinsic value is the most abstract concept, because it refers to an estimate of the real value of a company. Company value in the concept of intrinsic value is not just the price of a set of assets, but the value of the company as a business entity that has the ability to generate profits in the future.
Book value. Book value is the value of a company calculated on the basis of an accounting concept. It is simply calculated by dividing the difference between total assets and total debt by the number of shares outstanding.
Liquidation Value. Liquidation value is the selling value of all company assets after deducting all obligations that must be met. Liquidation values can be calculated in the same way as calculating book values, i.e. based on the performance balance prepared when a company will be liquidated.