The market value of the stocks and the shares are the representation of the company profile and performance in the market. The value of the organization can be affected by various factors making the changes in the internal or the external factors. The value of the stocks of an organization is determined by the revenues generated by the organization by its business. The internal factors are those factors that are affecting the production or the review of the organization and the external factors are those which are related indirectly to the organization. These factors are affecting the organization as the market value is determined on a global basis and the changes in the market globally affect the organization. 

Market value 

The value of the stocks is determined by the market value of the organization. Whereas the market values of the organization can be known by the will of the investors who are interested to invest in the organization. The market value of the organization depends on the market value of the shares and the total outstanding shares. The organization works in the development of their stocks which can attract more and more investors. More numbers of investors in the organization lead to a high investment in the organization. The high rate of investment in the organization can improve the capitalization of the organization. The organization will have more funds to make the organization grow and develop in the betterment of the society or the organization itself. The organization’s market value can be considered as the value in which an organization has overall capital income in a fixed period. The market value of the stock of an organization represents the financial capital of the organization in its different businesses.

The market value is also known as the market capital which is calculated by multiplying the organization’s outstanding shares with the current price value of each share. 

The formula for Market value

The market value of the company = current market price of each share of the organization * total outstanding share of the organisation. As the market price of the share changes rapidly the market capital of the organization also changes. Whereas the organization’s outstanding shares remain the same. Thus the organization’s values change by the changes in the share’s price. The outstanding shares change if the organization is making the move towards any specific action in the development of the organization.   

 Market value and Book value  

The market value of the organization is dependent on the organization’s share which can change from time to time. The book value is the representation of the organization’s different assets which can be recorded in the balance sheet or books. The book value of the organization reflects the financial condition of the organization with the help of the balance sheets of the organization and other financial statements. The overall worth of the organization of book value is rarely enough to meet the amount of the stockholders if the organization’s assets are liquidated. The book value of the organization depends on the assets and the liabilities they have. The organization’s book value is calculated by the formula used by using the assets and liabilities.

Book value formula

Book value of the organization = Total assets – Total liabilities

The total assets of the organization include all the financial assets, the environment made by the organization, cash, and the various accounts of the transaction amount. Along with these, there can be physical assets of the organization like property, equipment, plants, and vehicles. The liabilities are the debt on the organization, payable accounts, and the various taxes paid by the organization.  The book value of the organization does not always include the different impact on the claims in the assets as well as the cost of selling. The book valuation will be high if the organization is functioning and can go bankrupt if the assets are less than liabilities of the organization.   

Limitations and Importance of Market value

Limitations

• The investment cannot be done by just viewing the market value of the organization. Investors cannot trust the current values and cannot consider the better market value in the coming future. 
• Risks related to the investment cannot be identified with the help of market value tools of the organization; it requires deep analysis of the organization’s performance.

Importance

• The higher market value of the organization leads to the high investment by the investors in the organization which helps in the growth of the organization. 
• The market value of the organization represents the organization’s performance in the global markets and helps in the recognition of the organization. 

• Conclusion

  The importance of the market value of the organization is discussed in the above part concluding the effectiveness of the stocks and the shares in the organizational development. The importance of market value and the different factors which can affect the market value are also discussed. The organizational development with the help of different values of the organization including discussion based on the book value of the organization. The book value of the organization represents the important assets of the organization and the various liabilities. The assets can help in the development of the stock’s value of the organization and overall improve the investment in the organization.