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Dear tutor,
Please refer to this question and explain for me this sentence
“…Share prices may increase irrespective of the actions and decisions of managers or even despite them…”
I dont quite understand why Share prices are not depend on the decisions of the managers???
Here is just one example:
As you will know from my free lectures, if general interest rates fall then share prices increase. This happens both in theory and in real life, and is nothing to do with whatever actions the managers might have taken.
Another example:
If we have a company who makes its money by exporting goods, then if the exchange rate changes it may mean they are able to export much more and make more profits (which is nothing to do with the actions of the managers) and therefore have a higher share price.
“…then if the exchange rate changes it may mean they are able to export much more and make more profits…”
Im thinking 2 perspectives in your example 2
Being able to export much more and make more profits to service market demand ( is it market demand relate to decision-making of the managers? i think if the co. has a good products as well as a good price then it will gain a foothold
My second viewpoint : producing more goods is also a decision of managers enabling to export moreIf a company is an exporter and the exchange rate moves in the favour of the company, then demand from abroad will likely increase. This is not due to actions of the managers – it is not them who determined the exchange rate.
im still confuse maybe not yet study about exchange rate. Ex rate is obviously not under control of managers
But that is the whole point of your original question!!!
Profits and therefore share prices do not just depend on the decisions of managers – other things affect them as well. It is nothing to do with studying about exchange rates – they can affect the profits but they are not something that the managers decide about.
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