What Are the Benefits of Added Market Value?

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Market Value Added (also known as MVA in the business world) constitutes the difference between the market value of a company or concern and the capital that is contributed to that company or concern by its investors. The greater the MVA, the greater the value of the company—this proves that the company has worth, aside from the capital contributed by its investors. There are many benefits for a company to have a healthy added market value, including increased attractiveness to possible investors; the likelihood of high returns for investors; the probability that the company will survive for years (and perhaps even decades) to come, even if some investors cash out and move on to new projects; and that the company has solid, perhaps even great, management in place, leading it toward a profitable future.

Increased Attractiveness to Prospective Investors

With a higher market value added, a company is more likely to catch the eye of investors looking for attractive options in which to invest their capital—it is clear that the company is healthy and thriving, signaling the likelihood of good returns for investors later down the line. For investors who aren't looking for a long-shot, big-pay-off gamble, investing in a company with a high market value added appears to be a safe and more secure investment route.

High Returns for Investors

Obviously, if a high MVA is attractive to prospective investors, there are benefits for those who have already invested their capital. A company with a high MVA has created significant returns and has proven to be profitable for current investors. With such a reputation among investors in the business world, a company can expect good press and great interest from investors in the future, guaranteeing a certain amount of life and prosperity. High returns for investors also can lead to even more capital from these investors, as they seek to continue reaping the rewards from their beneficial investment and it will mean that their original investments and shares will increase in value.

Survival of the Company

In the business world, nothing is guaranteed. However, for a company that is healthy enough to have decent—or even high—added market value, the future is bright. This is an indication that the company is earning for its investors, will continue to attract investors and will continue to survive and thrive. Weathered investors have experienced their fair share of failed businesses, and having one that makes it and returns to them a healthy profit is one that will continue to grow.

Good Management In Place

In order for a company to experience the kind of success that brings positive market value added, there needs to be good leadership within the firm. This kind of leadership encourages confidence among investors and adds to the positive reputation that such a successful firm is likely already building. With good management that has already found formulas to produce success and profitable returns to investors, prospective investors will take notice, enabling the company to continue and to grow.

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About the Author

Alissa Kinney is a full-time professional in the communications field, with an AB from Brown University and an MA in Writing & Publishing from Emerson College. She has years of experience as an editor and writer, and has been published in The Blue Doors, Our Town Brookline, Art New England and Body + Soul.

Photo Credits

  • money money money image by Arman Zhenikeyev from Fotolia.com