MIS 111 Lecture Notes - Lecture 2: Financial Statement, Market Capitalization, Value Engineering

• School: University of Arizona
• Department: Management Info Systems Main
• Course: MIS 111
• Professor: W.Neumann, M.Patton

Document Summary

Stocks provide a key instrument for holding personal wealth as well as a way to diversify spreading and reducing the risks that we face. For companies, they are one of several ways to obtain financing. Stocks and stock markets indicate the value of the companies that issues the stocks and they allocate scarce investment resources (actually a proximity) Stock prices tell us the market value of companies, which determines the allocation of resources. The total assets of the company are the book value. Firms with a high stock market value have an easier time garnering the resources they need to grow, while firms whose stock value is low have difficulty financing their operations. So long as stock prices accurately reflect fundamental values, this resource allocation mechanism works well. Every major country has a stock exchange: Shifts in investor psychology may distort prices; both euphoria and depression are contagious gaps.