Why Do Companies Care About Their Stock Price?
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There are several reasons a company may care about keeping a high and rising price.
Price elasticity of demand describes how changes in the cost of a product or service affect a company's revenue.
A stock buyback, or repurchase, occurs when a company buys its own shares off the market and therefore reduces the amount of stock outstanding.
The wealth effect is a psychological phenomenon that causes people to spend more as the value of their assets rises. The premise is that when consumers' homes or investment portfolios increase in value, they feel more financially secure, so they increase their spending.
The dividend payout ratio and retention ratio measure how much profit a company gives back to shareholders as dividends. When a business earns money, it must decide whether to use all of its earnings for future operations or to pass some of it along to stockholders through a quarterly dividend check.
A company’s financial statements may refer to multiple types of stock, including authorized, outstanding, float and restricted shares. If a company issues more shares, its outstanding shares will increase. The outstanding shares comprise of float stock and restricted stock
The discount rate is the interest rate you need to earn on a given amount of money today to end up with a given amount of money in the future. Let's say you need $1,000 one year from now to go on vacation. We can use the discount rate to determine how much money you would need to have today to have $1,000 in one year.
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