Risk and the magnitude and timing of cash flows are the key determinants of share price, which represents the wealth of the owners in the firm.

Question

Quizplus · Accepted Answer

Risk and cash flow are two important factors that significantly affect the share price of a company. Investors are always concerned about the level of risk involved in investing in a particular company and their ability to generate cash flows over time. A company with a high level of risk and unpredictable cash flows may have a lower share price compared to a company with a lower risk profile and stable cash flow. Therefore, the share price represents the value of the company and the wealth of its owners.

Risk and the Magnitude and Timing of Cash Flows Are