If the “ABC Computer” stock was brought for $1 per share, and if the company comes out with an innovative product after you purchase the share and if the product has a high demand in the market, the business and profits of the company will increase and the stock price of the company will increase to $2 a share or even more. When the value of the share increases, the shareholders make a profit.

Alternately, if the company meets up with a decline in business or if it looses its major contract, which contributed to a major of the profit, then the stock price will decline to $0.50. When the value of the share decreases then the shareholders meet up with a loss.

Factors Which Affect Stock Prices (A Preliminary Discussion)
The important factors which affect the stock prices are as follows:

• Profitability – If the company is making a lot of profit or if the company has a greater chance of making better profits in the near future, then more number of people will be interested in paying for the stock of the company by purchasing the shares.
• Property – If a company owns more property (assets) and fewer debts; then the shares of such a company will be worth more, because the investment made in the stock of the company is not at debt risk, where the company will owe a lot of money to the lenders.
• Management - If the management of the company has proved its worth over the past years, then the investors will be confident about the management of the company and they will believe that the company will succeed, the stock price will also be likely to increase.