The value of companies depends on how they operate, according to a new report by the Value of the Company Institute.
The Institute, a think tank, released the report titled ‘Value of Companies 2016’ on Monday, highlighting the importance of tracking the success of companies and analysing the data they gather.
“Value of companies is largely dependent on how the business is operated, and how it is managed,” it said.
“The success of a business depends on the value that it creates.
Companies are not necessarily profitable in every instance, but they do generate a lot of value in the long run.
They are a great asset to investors.
They help to sustain a business and generate additional income for the company.”
It added that the companies most likely to be worth their investors’ while are those that provide a great service to the customer, and are a leader in the technology sector.
“If a company is successful in providing an excellent customer experience, a great product, and a secure, reliable and low-cost cloud platform, the value of its assets can be high.
Companies that can generate revenue on a sustainable basis and are profitable are also more likely to attract investment,” it added.
The report noted that a company’s operating environment has a significant impact on the overall value of an investment.
The institute said that a large proportion of the value in a company lies in its management, as it determines how it manages the company’s resources, as well as the value generated by its operations.
It noted that the value created by a company depends on its focus and the level of investment it makes in its business, and the size of the customer base it serves.
For example, a technology company that has a focus on software as its primary revenue stream could be considered to have higher value than a technology firm that focuses on manufacturing, it said.
“The Institute pointed out that while it is difficult to quantify the impact of technology investments on the business, it has found that a higher percentage of technology companies have had a positive return on their investment.”
Technology investments are not always successful, but if they are, they can generate a return of at least five times higher than the value they would have earned otherwise,” it pointed out.
The value of technology is not a fixed quantity.
Companies can invest in more innovative products and services, while other companies may be more conservative in their spending.
Companies that focus on manufacturing or services, for example, will have a higher return on the capital they invest, the institute said.