If the stock price falls too much then the company may need to borrow money to raise funds to expand the business. The share price can also impact financing from banks. This is because they see a link between a company’s earnings and its share price.
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@karthik3010
Please review the ans for last question.
Does stock price affect the monetary aspects of the company? How?
My Ans:
No. The stock price does not affect the monetary aspects of the company. The company’s profit / loss is based on their revenue, expenses and thus earnings. The market prices are decided by the buyers and sellers based on their estimation on the company’s earning potential. It is between the buyers and sellers only. Company’s performance are not decided by the market value but the market value depends on the company’s performance.