Identify the external factor that affects the value of a firm's stock.
A)Capital structure decisions
B)General level of economic activity
C)Capital budgeting decisions
D)Dividend policy decisions
E)Cash flow of the firm

Question

Identify the external factor that affects the value of a firm's stock. 
A)Capital structure decisions
B)General level of economic activity
C)Capital budgeting decisions
D)Dividend policy decisions
E)Cash flow of the firm

Quizplus · Accepted Answer

The general level of economic activity, such as the overall health of the economy, interest rates, inflation rates, and market stability, significantly affects the value of a firm's stock. When the economy is booming, the stock markets tend to be high, and the value of the firm's stock increases. Similarly, during an economic recession, the value of the firm's stock is likely to decline.

Identify the External Factor That Affects the Value of a Firm's