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.
Unbundling is what happens when a parent company with a few lines of business decides to keep its core businesses and sell the rest of its assets, product/service lines, divisions or subsidiaries.
Investopedia explains: A common size balance sheet is a valuable tool for tracking and analyzing the changes and performance of a business over multiple time periods.
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.
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