A share's market value is dependent on investors' expectations of future cash flows to the firm.

Question

Quizplus · Accepted Answer

The market value of a share or a stock is closely tied to investors' expectations of the company's future earnings and potential for growth. If investors believe that a company's cash flows will grow in the future, they may be willing to pay a higher price for the stock, which increases its market value. Conversely, if investors have low expectations for future cash flows, they may not be willing to pay a high price, which decreases the stock's market value. Therefore, it is true that a share's market value is dependent on investors' expectations of future cash flows to the firm.

A Share's Market Value Is Dependent on Investors' Expectations of Future