A Logical Umbrella for Firm Evaluation: The Fundamental Relation [Un Ombrello Logico Per La Valutazione Di Azienda: La Relazione Fondamentale]

Carlo Alberto Magni

No 5730, Proyecciones Financieras y Valoración from Master Consultores

Abstract: This paper analyzes the relations among different concepts such as earnings, profit, interest, rate, consumption, dividend, installment, cash flow, capital. It aims atembracing these notions in a unique conceptual "umbrella" , consisting of five perspectives: (1) accounting, (2) economic theory, (3) theory of finance, (4) loan theory, (5) financial mathematics. These notions and these domains constitute a seeming mishmash: in fact, the hub of the umbrella is given by a unique fundamental relation, shared by all five perspectives and whose ingredients are capital, profit, and cash flow. On the basis of the fundamental relation, market value and book value of a firm are easily obtained.

Keywords: Firm; capital; profit; interest; loan (search for similar items in EconPapers)
JEL-codes: B41 G11 G12 G31 M41 (search for similar items in EconPapers)
Pages: 13
Date: 2009-07-28
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Persistent link: https://EconPapers.repec.org/RePEc:col:000463:005730

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