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Security Valuation

Valuation: "Valuation is the process that links risk and return to determine the worth of an assets." - L. J. Gitman

Value: Value is what an assets is worth today in terms of its potential benefits.

Cash Flow: "An assets does not have to provide as annual cash flow; it can provide and incremental cash flow or even a single cash flow over the period." - L. J. Gitman


Bond: "A corporate bond is a debt instrument indicating that a corporation has borrowed a certain amount and promise to repay it in the future under clearly defined terms."- L. J. Gitman

"A bond is a long term promissory note issued by a business or government unit." - Besely and Brigham

Zero Coupon Bond: "A zero coupon bond makes no periodic interest payments but interesd to sold at a deep discount from its face value." - Van Horne

Liquidation Value: The amount of money that could be realized if an asset or a group of assets is sold separately from its operating organization is liquidation value.

Going-concern Value: Going-concern value is the amount that a firm could realize if it sold its business as an operating business.

Market Value: The price at which an asset trades is called market value.

Intrinsic Value: The price a security "ought to have" based on all factors bearing on valuation is called intrinsic value.

Face Value:

Redemption Value: The value which a bondholder will get on maturity is called redemption value.

Preferred Stock Valuation: The stock which promises a fixed dividend, but at the discretion of the board of Directors is called preferred stock.

Rates of Return (Yields): The rate of return on an asset or investment for a given period, say a year, is the annual income plus any change in market price, usually expressed as a per cent of the opening market price.

Yield: Yield is the return on a security based on its current earnings in relation to its current price on the stock exchange.

"The rate, which sets the discounted value of the expected cash inflows equal to the security current market price is also referred to as the security's yield." - Van Horne

Yield to Maturity on Bonds (YTM): "Yield to maturity is the expected rate of return on a bond if brought at its current market price and held to maturity." - Van Horne

"The rate of return investors earn if they buy a bond at a specific price and hold it until maturity." - L. J. Gitman

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