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3.13.5: Understanding Securities Markets

  • Page ID
    58886
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    Learning Objectives

    1. Show how the securities market operates and how it’s regulated.
    2. Understand how market performance is measured.

    So, before long, you’re a publicly traded company. Fortunately, because your degree in finance comes with a better-than-average knowledge of financial markets, you’re familiar with the ways in which investors will evaluate your company. Investors will look at the overall quality of the company and ask some basic questions:

    • How well is it managed?
    • Is it in a growing industry? Is its market share increasing or decreasing?
    • Does it have a good line of products? Is it coming out with innovative products?
    • How is the company doing relative to its competitors?
    • What is its future? What is the future of its industry?

    Investors also analyze the company’s performance over time and ask more-specific questions:

    • Are its sales growing?
    • Is its income going up?
    • Is its stock price rising or falling?
    • Are earnings per share rising?

    They’ll assess the company’s financial strength, asking another series of specific questions:

    • Can it pay its bills on time?
    • Does it have too much debt?
    • Is it managing its productive assets (such as inventory) efficiently?

    3.13.5: Understanding Securities Markets is shared under a CC BY-NC-SA license and was authored, remixed, and/or curated by LibreTexts.

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