1 Answers: Can someone explain why is Tesla more valuable than Ford?
Its only more valuable cos people think its gonna make a lot more profit in future than ford so are buying its shares
value is only what people THINK its worth – not what its actually worth – you only find out what something is actually worth when you come to sell it
You only have to look at the financial statements of companies- Accountants value parts and work in progress as if the company were to continue as a going concern and all those parts used and stock sold In the “real” world those parts and WIP have far less value- if the company STOPS work
E.g – a company MAY “value” specific parts for a car at say $100 each (cos thats how much they cost to make) – if they have 10000 of them THAT puts their value on the books @ 1million Problem is – those parts can ONLY be used on that car- – so if the company stops making it those parts can only be sold as scrap at say $1 each – so their “value ” on the books drops from $1million to $10000
(the company didnt “lose” 990k when it stopped making the car – It lost 99 on each part when it made it cos it cost that to convert raw materials into the part
Fact is company accounts are an accounting con trick – just to make the “value” of the company equal the amount shareholders have put into it – When in reality it dont – it NEVER can – money is ALWAYS needed to make a product – THAT money is down the drain until the goods are sold, and there is ALWAYS a time lag between making parts for the product and selling it