Describe patterns of cash flows for share of common stock

Describe two patterns of cash flows for a share of common stock. How does the market find out the value of the most common cash flow pattern for common stock?
Cash flows for share of common stock contain dividend payments and the price attained for the eventual sale of the share. Common stock valuation is complex by the fact that common stock dividends are hard to predict compared to the interest and principal payments on a bond, or dividends at preferred stock. Certainly, corporations may pay common stock dividends irregularly, or not pay dividends at all.
As along with bonds and preferred stock, the market values common stock by estimating the present value of the expected future cash flows from the common stock.

   Related Questions in Finance Basics

  • Q : Production at a point outside the

    Normal 0 false false

  • Q : Pitfalls when two companies merge Other

    Other than pricing, some pitfalls that consumers might have to deal with when two major companies merge.

  • Q : Explain LBO-risks for equity investors

    Explain LBO? Describe risks for the equity investors and also describe potential rewards? A leveraged buyout is purchase of publicly owned corporation through a small group of investors by using a large amount of borrowed money. The risks for

  • Q : Describe financial ratio Describe

    Describe financial ratio? This is a number which expresses the value of one financial variable relative to another. Put more cleanly, a financial ratio is the result you obtain when you divide one financial number by another.  Computing an

  • Q : Define Pooled Money Investment Board

    Pooled Money Investment Board (PMIB): The board included of the Director of Finance, State Treasurer, and the State Controller, the aim of which is to design an efficient cash management and investment program, employing all monies fl

  • Q : How do financial managers compute the

    How do financial managers compute the average tax rate?Average tax rates are calculated through dividing tax dollars paid by earnings before taxes (EBT).

  • Q : Define Current Year Current Year (CY):

    Current Year (CY): It is a term utilized in budgeting and accounting to designate the operations of the current fiscal year in contrast to past or future periods.

  • Q : Define Warrant Warrant : It is an order

    Warrant: It is an order drawn by the State Controller directing the State Treasurer to reimburse a particular amount, from a specific fund, to the entity or person named. A warrant usually corresponds to a blank check however is not essentially payabl

  • Q : Question related to MPC Normal 0 false

    Normal 0 false false

  • Q : Can a company hold a default rate on

    Can a company hold a default rate on its accounts receivable that is too low? Describe. A company could hold a default rate on AR which would be considered too low if by liberalizing credit terms a significant rise in sales revenue and cash inf

©TutorsGlobe All rights reserved 2022-2023.