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Applied Methodology with “Hands-On” Practice for Doctors                      

By Lester Barenbaum; PhD

By Michael Saponara; JD, CPA

The market value of a publicly traded company’s equity can be calculated at a point in time by multiplying its share price by the number of shares of common stock outstanding.  The share price is determined in the public marketplace by buyers and sellers who trade the stock. 

The Buyers

Buyers of publicly traded company shares such as IBM expend money now (invest) for the right to receive uncertain future economic benefits. The price (value) an investor pays for a share is based upon his or her assessment of the size, timing and certainty of receiving future economic benefits. 

The Sellers

Likewise, a seller of IBM equity is willing to forego his or her expectation of future economic benefits if the investor believes that the benefits given up are worth less than the proceeds (value) from selling the ownership position.  Thus, the share price of IBM at a given point in time represents the value of future economic benefits as perceived by buyers and sellers of IBM equity at a point in time.

Assessment

This value is observable through transactions in the marketplace. In contrast, closely held businesses generate also economic benefits for their owners but the value of those companies cannot be directly observed by activity in traded markets.

Link: bizvaluationsbarenbaum11

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OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

• PRACTICES: www.BusinessofMedicalPractice.com
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• Dictionary of Health Economics and Finance
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• Dictionary of Health Insurance and Managed Care

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