Price Vs Value

Question 1

What is price

Answer 1

Monetary amount seller would like to receive/ believes they should receive

Price influenced by s/d forces

Buyer has options to pay asking price, decline or negotiate counter price

Question 2

What is value

Answer 2

Question “what is it worth” in buyers eyes

Subjective/ conceptual

Possible for price and value to equal = rate and value doesn’t have to have monetary amount

Sources may refer to investments as over / under valued when they mean priced

Question 3

Example

Answer 3

I.e high priced shares can reflect good value = good income or good cap growth

Low priced shares for Co with large liabilities and debts forced into admin = no return so price and value both low

Question 4

What do investors need to vigilant for when using info

Answer 4

Modern volatile markets and large no sources of info available

Investors must distinguish between relevant and irrelevant, appraise objectivity and look out for

• indicators shares under priced
• warning signs shares over priced
• reasons to buy, hold or sell equities

Different classes of stakeholders require info for own purposes (investors making informed decisions and advisors assessing return/ advising clients)

Question 5

Outline useful sources of info

Answer 5

Stock exchanges (up to date SP, reports and reg info)

Financial info subscription service providers
(Bloomberg and Reuters cover info such as market prices, no shares issued, Co profiles, market capitalisation, PE ratio and Div yield, day/ weekly highs and lows)

Independent financial advisors (informed info on range of products)

Newspapers & other publications (tips, advice on buying and selling, warnings)

-investors chronicle, ICSA magazine, the economist

Question 6

Outline other sources of info

Answer 6

Television

Radio (specialist business programmes)

Internet/ co web pages

Stockbrokers - advisory

Seminars/ courses

Specialist investment blogs

Webinars

-hard copies out of date