17
edits
Changes
Jump to navigation
Jump to search
Line 253:
Line 253: + + + +
no edit summary
::The stock gets it's value from the total value of the company divided by the number of outstanding shares. Dividends are the profits made by a company that are not reinvested in the company as retained earnings. The only way to take money out of a company is to pay all the shareholders proportionally. So if the company were sold for cash for example, each shareholder would get a portion of the sale in proportion to how many shares they have. By leaving the profits in the company the value of the company increases, increasing the value of the stock. The stock price and company value match up because of two forces acting on the stock price: 1) If the stock price is lower than the value of the company then someone could buy enough of the stock to sell the company for cash and make more than he paid for the stock. 2) If the stock price his higher than the value of the company, then the market demand for the stock decreases because you wont be able to get that amount of money out of the company and the price drops accordingly.
::The stock gets it's value from the total value of the company divided by the number of outstanding shares. Dividends are the profits made by a company that are not reinvested in the company as retained earnings. The only way to take money out of a company is to pay all the shareholders proportionally. So if the company were sold for cash for example, each shareholder would get a portion of the sale in proportion to how many shares they have. By leaving the profits in the company the value of the company increases, increasing the value of the stock. The stock price and company value match up because of two forces acting on the stock price: 1) If the stock price is lower than the value of the company then someone could buy enough of the stock to sell the company for cash and make more than he paid for the stock. 2) If the stock price his higher than the value of the company, then the market demand for the stock decreases because you wont be able to get that amount of money out of the company and the price drops accordingly.
==Move Homework?==
Forgive this newbie question but - Could we move course homework to another page / section? It would clarify article discussions and allow for a higher quality page.
[[User:Apjames|AP James]] Feb 22 2008