Question

Explain the reason for this phenomenon, “Shareholders wealth increases when share prices

increases”.​

Answer 1

Answer:

When the market value of shares rises, then shareholders wealth increases. This can be understood with the help of the following example.

Let's suppose that a shareholder has 100 shares of Rs 10 each. Now, when the market price of shares increases from Rs 10 to Rs 15, then the wealth of shareholder increases from Rs 1000 (100×× Rs 10) to Rs 1500 (100×× Rs 15).