Market prices are useful to a financial manager because it help them decide what resource should be spent with it the company. For example if market prices tell the finance manager if more money should be spent on increasing production so more products can be sold. The market prices should the manager the supply and demand with in the market, which help them compare cost and benefits. It helps them determine increase in demand from low price. Prices show the manager the results from advertising, and prices also show competitors responses to a price increase. If the right decisions are being made by the manager it should be easy to compare cost and benefits because current market prices should be easy to convert into equal cash value.
Discuss how the Valuation Principle helps a financial manager make decisions.
Valuation Principle helps a financial manager determine the company’scompetitive market prices for their product. Pricing the company’s products to high or low could cause the company to go under. Valuation principle helps the manager determine the best decision to make the firm and its investors wealthier. Valuation principle shows the manager what decisions to make when the value benefits or high then the cost the decisions or project, which makes profits for the company. Valuation principle takes the cost in today’s current market prices and converts into money in the future to decide if there is a positive net