A fall in stock prices can
A)reduce the net worth of the firm.
B)reduce the net worth of the stockholders.
C)possibly lower the value of a firm's collateral.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

A fall in stock prices can reduce the net worth of the firm, which is the difference between assets and liabilities. This can also reduce the net worth of the stockholders, as the value of their shares decreases. Additionally, a fall in stock prices can lower the value of a firm's collateral which is pledged to secure loans.

A Fall in Stock Prices Can