A company’s share price reflects investor *expectations* about its future performance, not just current profits. Sometimes, profits may grow but if investors believe the growth is temporary, or if there are risks from competition, regulatory threats, or market conditions, share prices may stagnate or decline. Moreover, macroeconomic trends, interest rates, or global events can overshadow quarterly profit results, driving prices down despite profitability.

No. Companies receive capital only during the primary market when they issue new shares, like during an Initial Public Offering (IPO) or further share issues. After listing, shares trade between investors in the secondary market — like the Bombay Stock Exchange or NSE — and the proceeds go from one investor to another, not the company.

Share prices fluctuate in real-time because markets constantly absorb new information — from industry news, global economic data, interest rate changes, to geopolitical events affecting investor sentiment. Profits, released quarterly, are only one piece of the puzzle; investors trade shares on their expectations of future earnings, competition, and other factors that impact company value.

Market value is the price at which a share trades on the stock exchange and varies with supply-demand and investor perceptions. Book value represents the company’s net asset value per share, calculated from its financial statements. Companies often trade at a premium (market value > book value) if investors expect growth or at a discount if they foresee difficulties.

The company doesn’t lose money when promoters sell shares, as transactions occur between investors on the stock exchange. However, promoter selling can affect market sentiment and share prices if investors see it as a lack of confidence in the company’s prospects.

Share buybacks reduce the number of outstanding shares, which often increases earnings per share and can boost the stock price. It’s a way for companies to return surplus cash to shareholders, signal confidence in the firm’s value, or improve financial ratios like return on equity without paying dividends.

Bonus shares increase the total number of shares held by shareholders proportionally but don’t increase the value of their investment. The market price adjusts to reflect this increase in shares, so the overall wealth remains the same. Think of it as a stock split rather than a cash benefit.

Share splits reduce the price per share while increasing the number of shares held. This makes shares more affordable and attractive to small investors, improves liquidity, and can boost trading volume, all without impacting the company’s market capitalization.

A share price falling below face value could signal financial distress or market pessimism. Stocks trading at such low prices are often labelled “penny stocks” and may face delisting risks. However, companies do not owe money because of price drops — the value represents market perception, not liabilities.

Share prices cannot go below zero. If a company fails completely, shares may become worthless (zero value), but prices never go negative as you cannot owe money by holding shares.

Taking on debt increases financial obligations and risk. If investors fear the company might struggle to repay or incur high interest costs, the perceived risk rises, sometimes causing a drop in the share price despite the new capital.

High debt levels mean fixed interest payments regardless of business performance. In bad times, meeting these obligations is challenging, which increases the risk of default and financial distress, negatively affecting shareholder value.

Dividends reduce a company’s retained earnings used for growth. When dividends are paid, the share price typically adjusts downward by the dividend amount on the ex-dividend date, offsetting the cash payout.

Many fast-growing companies reinvest profits into research, expansion, or acquisitions to generate higher returns in the future. They prefer rewarding investors through capital gains rather than periodic dividends.

Not necessarily. Although it increases funds, issuing new shares dilutes existing ownership and earnings per share unless capital is used efficiently for growth.

Discounted rights shares encourage existing shareholders to participate in new fundraising by making the offering financially attractive, helping companies raise capital with less resistance.

M&As often cause volatility. The acquirer’s shareholders may worry about risks and costs, pressuring its price, while the target’s price often rises because of takeover premium.

Despite risks, equities offer the highest long-term growth potential compared to fixed income or cash. Investors tolerate volatility because disciplined investment in stocks has historically created real wealth over time.

Profitable companies have strong financials and are reliable borrowers. Banks lend to help businesses expand or manage working capital, confident in timely repayment.

Moderate inflation signals growth, but high inflation erodes purchasing power, raises costs, and fuels uncertainty, which can stifle investment and savings.

Yes, if investors anticipate a turnaround or future growth prospects, share prices can rise regardless of current losses.

Higher interest rates reduce borrowing and spending by businesses and consumers, cooling demand and thereby controlling inflation.

Investment is focused on long-term fundamental growth and steady returns, while speculation bets on short-term price moves and is riskier.

FIIs bring large capital inflows and outflows, greatly impacting liquidity and market sentiment, leading to pronounced market swings.

The primary market is where companies issue new shares to raise funds from the public (IPOs). The secondary market is where investors buy and sell existing shares, like NSE or BSE.

Preference shares have characteristics of both equity (ownership) and debt (fixed dividends), making them a hybrid security.

Equity shares represent ownership with voting rights and variable dividends; debentures are fixed-income debt instruments without ownership or voting rights.

Debentures allow raising funds without diluting ownership or control and have fixed interest costs instead of uncertain dividends.

Both have pros and cons: debt is cheaper but riskier; equity avoids fixed costs but dilutes ownership. Companies balance them based on strategy and market conditions.

Depreciation spreads the cost of a fixed asset over its useful life matching expense with revenue generation, though no cash is actually spent during each accounting period.