HOW DO STOCK PRICE CHANGES AFFECT A COMPANYS EQUITY ON THEBALANCE - ProProfs Discuss
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How do stock price changes affect a companys equity on thebalance sheet?



Asked by Mackenzie, Last updated: Oct 15, 2021

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John Smith

John Smith

John Smith
John Smith

Answered Sep 08, 2016

Fluctuations in a companys common share price on the stock market do not directlyaffect the balance sheet of the company. the value of the common stock reported onthe balance sheet generally reflects funds raised at the time of issue.the liabilities and owners equity section details, in part, the source of capital used inthe business. once the company issues shares to raise money, the shares tradebetween investors. fluctuations in stock prices reflect what investors are willing to payto own a piece of the company. fluctuations in stock prices, however, do not reflecthow much money was initially raised by the company and would not affect entries inthe owners equity section.potential stock buyers could pay above or below the companys equity per share - itdepends on the market environment. as an investor, though, you may want tocalculate the equity per share as a means of determining what kind of investment youare getting yourself into.
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