Is it important to create value in a company? How inflation affects the created value?

 Have you heard about the term creating value? If you are a finance student or working in a finance-related company, you might have known the meaning of value creation. There are many people out there does not know and understand the term, “value creation”. I really hope that if you read my blog, you will understand the meaning and the importance of creating value in the company.

Creating value is the process of maximizing the benefits of the company in terms of finance. For example, if an investor invested RM 5 in a company, the return should be higher because if the return is less, the value will not be created. The main purpose of investment is to create value which is to maximize the benefits based on the invested capital.

Is it necessary for the investors to create value in the company based on the investment? This is very important because the growth of the company is entirely dependent on the maximization of finance in the company. This is very important for the today’s changing business environment as the country’s economy is relying on the income gained by every company in the country. Briefly, if a company is able to create value which is improving the income and also the cash flow, the specific company will be able to pay a good amount of income tax to the country. If every company does this, the income level of the country can be increased well. This is the main reason every company and investor should focus on maximizing the value in terms of finance.

Furthermore, value creation is extremely important as the value differentiates the companies from the other competitors, helps to secure the long – term customers, and also brings a different meaning to the brands as well as the solution. Usually, the investors create value by delivering higher returns consistently and effectively based on the invested capital. In order for the investors to create value, it requires the revenue growth and also attractive profit margins.

It has been reported in the online newspaper, Reuters on 16th April 2020 that “Dividend cuts loom over BDC market as pandemic extends”. Briefly, the online newspaper explains that the main reason the investors invest is to get dividends as well as to implement the business performance in the companies. There were several companies have to reduce the value of dividends per share due to several reasons. Basically, it is not very easy to maintain the value of the dividend (David Brooke, 2020).

This is one of the current issues which need to be solved. 


What will happen if there is inflation in the country? Does it affect the value creation in the companies? Basically, inflation means the factors that help to lessen the value of the money according to the time. Briefly, based on the amount of money and the value in hand, the objects or goods which can be bought will be reduced. The price of the goods will get constantly higher due to inflation which means that in order to obtain an object, a high amount of money should be paid.

Therefore, inflation affects the created value in the company in a negative way. 

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