The price of a share is the average of all investors’ discounted cash flows of the future dividends of the company. If the profits and hence the dividends of a company are expected to fall then investors will tend to adjust the price which they are prepared to pay for the share downwards – and vice versa. This process is known as discounting. All events which impact the profitability of a company are “discounted” into its share price sooner or later.

Disclaimer - All information and data contained within the PDSnet Glossary terms is for informational and educational purposes only. PDSnet makes no representations as to the accuracy, completeness, suitability, or validity, of any information, and shall not be liable for any errors, omissions, or any losses, injuries, or damages arising from its display or use. Information in the PDSnet glossary terms is based on the author’s opinion and experience and should not be considered professional financial investment advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Thoughts and opinions will also change from time to time as more information is accumulated. PDSnet reserves the right to delete any glossary term for any reason.« Back to Glossary Index