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Unformatted text preview: ver higher. Companies, on the other hand, who reinvest all earnings in their
operations must provide a return to their shareholders in the form of higher stock prices; these companies
will be under the gun to continually improve operations, grow their businesses, and improvement cash flow
and earnings in order to move the stock price. c. Investors will monitor sales, profits and earningspershare on the income statement, as well as cash flow
from operations on the statement of cash flow. In addition to financial statement clues, investors can look
for industry information, such as market share and consumer surveys to predict future financial results for
the company. ID12–8
a. b. Book value of a stock is simply the equity on the balance sheet divided by the number of equity
shares outstanding. This figure is driven by Generally Accepted Accounting Principles. Market value
is the value placed on a share of stock by all the buyers and sellers in the free market. This figure is
driven by company results, but it is also influenced by factors such as general macroeconomic trends,
stock market trends, and very often the subjective mood of investors. The pri...
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