Importance of Value of the Company for Development Business

Importance of Value of the Company for Development Business

Lavinia Essen Yildirim (Ankara University, Turkey) and Diana Andreea Mândricel (Titu Maiorescu University, Romania)
DOI: 10.4018/978-1-7998-4637-6.ch012
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Abstract

The value of the company is necessary to become the key element in any entity development strategy. In this context, the action of the market contemporary forces determines certain behavior of the companies, which become more and more engaged in the resources, quality, customers, and suppliers, in which the top role is played by the top quality management. At the same time, the value of an enterprise or rather of its shares is no longer calculated as the sum of the values of its assets but determined by its ability to generate economic benefits, and the balance sheet loses interest in the income statement. This chapter analyses the new research directions regarding the value of the company in managing business risks.
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Introduction

The human society, as a whole, often considered and not without reason an extremely complex mechanism, had and has to face the challenges of first stringent problems - the implementation of an integrated system of performance indicators to accurately determine the value of a company. (Stettina & Hörz, 2015; Chan, Shaffer & Snape, 2004).

One aspect of great importance to the existence, perpetuation and rise or fall of companies in the economy of any country is their contribution to creating new value, or, in other words, the value added in order to be more relevant, needs to be examined closely, along with the number of employees (Becker & Huselid, 2006; Alhyari, Alazab, Venkatraman, Alazab & Alazab, 2013).

The framework in which the economic information is optimized is represented by the information system, whose decisive role is to provide the necessary information network to the entities involved in the economic process in order to minimize the risk and the uncertainty, thus facilitating the decision making relevant at any managerial level.

Most often the appreciation of the value of a company is based on analysis of profit and loss account. The option for researching the profit and loss account as a performance model, defines the system of evaluation and presentation of the result (Akgün, Keskin & Byrne, 2009).

Enterprises activity is not confined to any country to production in the strict sense; they participate in both exports and imports in order to achieve the purposes of the owners. In addition, it should be noted that between them, the most important place is micro (Arsenault & Faerman, 2014; Fisher, 2010). Due to its’ small size and simpler organizational structures, they can make many changes during their existence, that allow them to operate in conditions of economic efficiency. Another important advantage of small and medium size organizations refers to their innovative potential in the technical, technological and managerial view (Agha, Alrubaiee & Jamhour, 2012).

Value analysis of the company is another technique of organizing and processing the values of individuals and organizational culture (Amagoh, 2008; Taticchi, Tonelli & Cagnazzo, 2010). This method provides information about what people value more or less, about what they value as desirable in correspondence with certain intentions, expectations and ideals. In organizations where employees are more concerned with meeting the basic, elementary needs, their behavioral choices are restricted, which leads to a decrease in their contribution to increasing the efficiency of their work (Deutsch & Silcox, 2003; Ashkanasy, 2011). In strong economic firms, employees have higher aspirations, both spiritually and materially, which leads to their participation in organizational performance (Olson, Slater, Tomas & Hult, 2005; Andriole, 2010).

Successful companies increasingly manifest themselves as true open systems, whose position in the market depends not only on their internal resources, but also their relations with configuration and external entities with complementary skills. External network of the company is basically an extension of the internal borders between the two types of networks becoming increasingly difficult to identify.

This chapter proves that if the company ceases to expand at a cost under the cost of trading in the market, but equally the cost of organizing the transaction by another firm, both procedures may allow the organization of production at a price below the market. One can formulate the conclusion that if in a balanced approach and patrimonial, the result measures the variation of the patrimony owned by the company, the economic approach leads to the construction of a result as a performance indicator.

Key Terms in this Chapter

Environmental Characteristics: The external factors that may limit or support a company’s activities.

Organisational Performance: Elements affecting company performance such as financial and marketing factors, return on sales, return on investment, etc.

Financial Risks: These types of risk may reflect inadequate or unclear definition of strategies and objectives of the organization.

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