Dear friends
Why FInancial charges will not added to stock valuation ?
chandra shekara m (student) (64 Points)
05 July 2008Dear friends
Why FInancial charges will not added to stock valuation ?
Vidya
(Student)
(789 Points)
Replied 24 August 2008
Financial charges are incurred on generaton of capital funds for running the business and are to be treated at par with dividends when it comes to valuaing stocks. Including financial charges will result in a situation where stocks are overvalued in companies struggling for equity and largely depends on debt funds, compared to companies which are equity rich. This hinders inter firm comparision and results in undue advantage in the presented financials of debt based companies.
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