The most significant determinant of a share price is a company's:

A) beta
B) net profit
C) capacity to pay future dividends
D) book-to-market ratio

Question

The most significant determinant of a share price is a company's:

A) beta
B) net profit
C) capacity to pay future dividends
D) book-to-market ratio

Quizplus · Accepted Answer

The most significant determinant of a share price is the future dividends that accrue to shareholders,or more specifically,the company's capacity to pay future dividends.As this feature is unobservable,we make various assumptions about the future and employ various proxies.A significant determinant of future dividends is current and future earnings.However,earnings are influenced by many factors.Analysts typically focus on components of earnings and how these might change.

The Most Significant Determinant of a Share Price Is a Company's