What impact does financial communication have on the valuation of a company, and more specifically on its risk premium?
The impact of a good communications policy is difficult to measure. The aim should be to provide investors with as much visibility as possible over future results and the strategy followed, in order to avoid any bad surprises which are always heavily sanctioned by the stock markets. Back to the top Question 3: Is there a formula that can be used to determine the change in normalised free cash flows or do these normalised free cash flows fade in an arbitrary manner until the companys ROCE is equal to its WACC? Answer: There is no ready-made formula for determining cash flow fade. There are two levers that can be used for reducing ROCE EBIT margin and asset turnover, over a period that you select. Depending on the sector and your perception of risk, you can modulate these levers so that ROCE equals WACC at the end of the year.
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- What impact does financial communication have on the valuation of a company, and more specifically on its risk premium?
