Items in italics are direct quotes from the articles below
Once as a young man, John Paul DeJoria was homeless. Today, this self-made entrepreneur is worth over $3 billion. The founder of Paul Mitchell Systems and Patron Tequila, DeJoria recently gave a speech at the TEDx conference in Los Angeles. A first-generation American turned entrepreneur, DeJoria is an excellent example of achieving the American dream. His personal story and the companies he created are nothing less than inspirational. He is a socially minded business owner who develops brands around the pillars of sustainability, social responsibility, and animal-friendliness. He is also a member of The Giving Pledge, a philanthropic gathering of the wealthiest families in the world who are all committed to donating the majority of their wealth toward pro-social causes. But for DeJoria, that dream didn’t come without a lot of hard work and a resilient spirit. In his TEDx speech, DeJoria discusses how he overcame obstacles in his life and shares a few secrets to gaining an edge on the competition. DeJoria believes in this important attribute: going the extra mile. It’s about working hard. In his speech, DeJoria sums up his point, saying, “Doing what you should be doing, even when no one is watching.” DeJoria has two facets to becoming a successful entrepreneur:
1. Be Prepared For A LOT Of Rejection – Rejection is an inevitable part of the entrepreneur’s journey, especially when starting out. In the beginning, DeJoria suggests that we must not listen to people who doubt our abilities and just keep pushing. More importantly, by being properly prepared to deal with rejection, you will be much less affected by it.
2. Produce A Service Or Product Of The Highest Quality – While some companies worry about generating income over all else, DeJoria believes the quality of a product is critical. “You want your product or service to be so good,” says DeJoria, “that you’re not in the selling business, you’re in the re-order business.”
These lessons are straightforward, and yet they are widely applicable. If you implement them into your life, maybe someday you will reach the level of success Mr. DeJoria has. However, if you do, try to live with his motto in mind.
“Success unshared is failure.” – John Paul DeJoria
Understanding the difference between book value and market value is a simple yet fundamentally critical component of any attempt to analyze a company for investment. After all, when you invest in a share of stock or an entire business, you want to know you are paying a sensible price. Book value means the value of the business according to its financial statements. In this case, book value is calculated from the balance sheet, and it is the difference between a company’s total assets and total liabilities. Note that this is also the term for shareholders’ equity. For example, if Company XYZ has total assets of $100 million and total liabilities of $80 million, the book value of the company is $20 million. In a very broad sense, this means that if the company sold off its assets and paid down its liabilities, the equity value or net worth of the business, would be $20 million. Market value is the value of a company according to the stock market. Book value is the value of the company based on its books also known as the accounting value. Market value has a more meaningful implication in the sense that it is the price you have to pay to own a part of the business regardless of what book value is stated. Due to the importance of this article’s content, I’ve included a lot of the content. It’s worth reading.
There are three basic generalizations about the relationships between book value and market value:
- Book Value Greater Than Market Value: The financial market values the company for less than its stated value or net worth. When this is the case, it’s usually because the market has lost confidence in the ability of the company’s assets to generate future profits and cash flows. In other words, the market doesn’t believe that the company is worth the value on its books. Value investors often like to seek out companies in this category in hopes that the market perception turns out to be incorrect. After all, the market is giving you the opportunity to buy a business for less than its stated net worth.
- Market Value Greater Than Book Value: The market assigns a higher value to the company due to the earnings power of the company’s assets. Nearly all consistently profitable companies will have market values greater than book values.
- Book Value Equals Market Value: The market sees no compelling reason to believe the company’s assets are better or worse than what is stated on the balance sheet.
It’s important to note that on any given day, a company’s market value will fluctuate in relation to book value. The metric that tells this is known as the price-to-book ratio, or the P/B ratio:
P/B Ratio = Share Price/Book Value Per Share
(where Book Value Per Share equals shareholders’ equity divided by number of shares outstanding)
The author goes on to compare the metric of book value vs market value by analyzing Coca-Cola and Wells Fargo & Co. It’s important to determine whether book value or market value is your metric in making a financial decision regarding a company. My opinion is book value and market value are dependent upon the level of commitment to your investment strategy. If your strategy is to invest in paper assets then book value and market value can play a factor in your decision, but if you are going to buy a company that is publicly traded then there are other factors that you must consider. In other words, the greater the commitment, the more work you should put in to ensure that your investment produces income. Remember an investment should be an income producing asset. If it’s passive income, and that income is greater than your expenses then you are wealthy.
For this week, I’ve included WHO WILL YOU BECOME? – 30 Minute Epic Workout Motivation Friday from Basquiat Picasso YouTube channel.
“If you think you know it all, you’re a fool for sure; real survivors learn wisdom from others.”
Proverbs 28:26 MSG