The CEO of Your Firm Has Just Remarked to You

Multiple Choice

The CEO of your firm has just remarked to you, "Quit worrying about the price of the company stock on the secondary market. After all, we received our funds for long-term expansion when we issued the stock in the primary market." As the finance director of the firm, what would your response be?

A) "Not so fast! Don't you know that we get a percentage of any revenue earned on the sale of stock on the secondary market?"
B) "You're right! Investors who buy stock in the secondary market don't provide us with any funds, so their views aren't relevant to how we manage the company."
C) "You're right! The price on the secondary market really has no relationship to our firm's financial situation."
D) "Not so fast! The price of our stock on the secondary market indicates how well we are managing our firm and benefiting our shareholders."