Share prices

Question 1

what is share price?

Answer 1

The cost to purchase and indivual share determined by supply of and demand for an organisations share

Question 2

what determines whether a share price would be high or low?

Answer 2

1. previous financial performance = if a business solid record producing profits and creating value for shareholder through dividend payments it is likely to be attractive to investors. therefore there would be high demand for share therefore share price increases. however if business has low profits throughout the year and does not pay dividend payments this would decrease demand for share therefore share price will decrease and increase in supply - as shareholder want to sell the shares.
2. predicted financial performance = if business is promising high profits and good performance that may encourage shareholders to invest in that company and increasing demand for share and increase share price.
3. the state of the economy = if the economy is in recession there would be lower profits and the demand for the share price would decrease. however if the economy is booming there would be higher profits and demand for share price would increase therefore higher share prices.

Question 3

what is importance of share price changes?

Answer 3

1. indication about future performance
2. determines a risk of takeover for company
3. determines confidence in company - if share price decreases then will suppliers be prepared to offer business trade credit also customers may not want to buy from the company may because of negative publicity on the news.