Financial

What is a ‘Valuation’
Valuation is the process of determining the current worth of an asset or a company; there are many techniques used to determine value. An analyst placing a value on a company looks at the company’s management, the composition of its capital structure, the prospect of future earnings and market value of assets.
BREAKING DOWN ‘Valuation’
The market value of a security is determined by what a buyer is willing to pay a seller, assuming both parties enter the transaction willingly. When a security trades on an exchange, buyers and sellers determine the market value of a stock or bond. The concept of intrinsic value, however, refers to the perceived value of a security based on future earnings or some other company attribute unrelated to the market price of a security.
How Earnings Impact Valuation
The earnings per share (EPS) formula is stated as earnings available to common shareholders divided by number of common stock shares outstanding. EPS is an indicator of company profit because the more earnings a company can generate per share, the more valuable each share is to investors. Analysts also use the price-to-earnings (P/E) ratio for stock valuation, which is calculated as market price per share divided by EPS. The P/E ratio calculates how expensive a stock price is relative to the earnings produced per share. For example, if the P/E ratio of a stock is 20 times earnings, an analyst compares that P/E ratio to other companies in the same industry and to the ratio for the broader market.

A line of credit is credit source extended to a government, business or individual by a bank or other financial institution. A line of credit may take several forms, such as overdraft protection, demand loan, special purpose, export packing credit, term loan, discounting, purchase of commercial bills, traditional revolving credit card account, etc. It is effectively a source of funds that can readily be tapped at the borrower’s discretion. Interest is paid only on money actually withdrawn. (However, the borrower may be required to pay an unused line fee, often an annualized percentage fee on the money not withdrawn.) Lines of credit can be secured by collateral, or may be unsecured.
Lines of credit are often extended by banks, financial institutions and other licensed consumer lenders to creditworthy customers (though certain special-purpose lines of credit may not have creditworthiness requirements) to address liquidity problems; such a line of credit is often called a personal line of credit. The term is also used to mean the credit limit of a customer, that is, the maximum amount of credit a customer is allowed.