Discussion board

I’m working on a Business question and need guidance to help me study.

hi everyone i want you to write your opinion about this topic “”“Firms do not care about the risks associated with their stock, since it does not affect their cost of equity capital.””

you have to write your won ideas 450 word

and then respons to comments

this is the first response

While their may not be risks derived from their cost of equity capital, there are plenty of other risks which causes a company to need to take their stock seriously and carefully manage it. Plus, there are many benefits that can be gained which can be used as reasoning alone for a company to care about the success of their stocks. For example, a companies stock prices are really what can dictate the success/risk of the stock. A companies stock price dictates the investors perception of its ability to earn and grow the profit in the future. Plus, if shareholders are happy, and the comapny is doing well, it will be reflected in the share price and therefore the management would likely remain receiving gradual increases in compensation. Additionally, if a company’s stock price is performing well along with the company, it will likely receive more favorable press from analysts and the media, and the prevention of takeover is a final reason that a firm should concerned with its stock price. I find these reasons to be more fulfilling and reasonable for why a company should be concerned with its stock regardless of the equity capital.

This is the second response :

I agree with you that businesses, especially large multinationals, will not really fixate on minor shifts within their stocks. I also think that stock prices play a vital role in determining how financially stable a company is, yet to an extent. A stock’s price says little about that stock’s value, and an increase or decrease in price is not necessarily a good or bad thing, respectively. The stock price only represents the company’s current market value, and it as well represents to price agreed upon by a buyer and a seller. So depending on the buyer to seller ratio – if there are more buyers, the stock price will increase, and if there are more sellers the stock price will decrease. It’s basically the supply and demand aspect of the economy that influences a company’s stock. On the other hand, the intrinsic value is what the company is actually worth in dollars, and it includes tangible and intangible factors, and I think that is the thing a firm must prioritize when considering their cost of equity capital.

the first paragraph and the First response on the second response has to be separate from each other

Prof. Angela


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