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Full-Text Articles in Social and Behavioral Sciences
The Relativity Of Risk Assessments In Investment Decisions, Michael Sack Elmaleh
The Relativity Of Risk Assessments In Investment Decisions, Michael Sack Elmaleh
Michael Sack Elmaleh
The level of risk in investing in a closely held firm is related to the qualifications of the control managing investor. While there is generally a minimum threshold of expertise and capital that a control investor must possess, beyond this threshold the potential levels of expertise and capital can vary significantly. The level of enterprise risk is inversely related to the level of expertise and capital possessed by the control investor. The more resources and expertise the investor possesses, the less the operational risk. Thus enterprise risk is a relative and not an inherent fixed property of an enterprise. Furthermore, …
The Income Method Of Valuation: A False Analogy Between Bonds And Stocks, Michael Sack Elmaleh
The Income Method Of Valuation: A False Analogy Between Bonds And Stocks, Michael Sack Elmaleh
Michael Sack Elmaleh
The discounting of future income streams by a risk adjusted rate of return by proponents of the income method reflects a misplaced faith in the ability to project accurately future income streams and pick out the “right” rate of return. Future income streams are fairly reliably predictable when analyzing a debt instrument. However, equity investment future income streams are notoriously unpredictable. Similarly assessing the risk associated with realizing returns from a fixed security is comparatively easy in comparison with assessing the risks associated with equity returns. The widely used Beta has not proved to be a very stable measure of …
Do Investors Demand Higher Rates Of Return On Risky Investments In Closely Held Small Businesses?, Michael Sack Elmaleh
Do Investors Demand Higher Rates Of Return On Risky Investments In Closely Held Small Businesses?, Michael Sack Elmaleh
Michael Sack Elmaleh
Investors in small closely held firms often are oblivious to risk if the rewards are perceived to be sufficiently high. Risk may also be ignored because such investors seek more than just increased cash flow. These investors often seek higher order psychological returns such as job challenge and status.
The Role Of Valuation Specialists: Telling It Like It Is Or Telling It Like It Ought To Be, Michael Sack Elmaleh
The Role Of Valuation Specialists: Telling It Like It Is Or Telling It Like It Ought To Be, Michael Sack Elmaleh
Michael Sack Elmaleh
While the buying and selling of businesses based on formulas may not be the soundest method of pricing a business the more rigorous methods do not always provide the best guidance either. Ideally prospective buyers should have knowledge of both formula methods and the more rigorous approaches.