alleryStart learning →How is the value of a publicly owned corporation measured?
ABy the total wages it pays its workforce
BBy the share price of its common stock
CBy the size of its yearly advertising spend
DBy the number of factories it operates
Answer & Solution
Correct answer: B. By the share price of its common stock
1. The value of a publicly owned corporation is measured by the share price of its stock.
2. That is why maximizing the firm's value and lifting its share price amount to the same objective for a listed company.
3. A private company's value is instead the price at which it could be sold, since no quoted share price exists.
4. Wages, advertising and factory counts are inputs to the business rather than measures of what it is worth.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 16 "Understanding Financial Management and Securities Markets", section 16.1 The Role of Finance and the Financial Manager_
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