I just don’t understand how it works…when I hold shares in a company and I spend money there, am I technically making a very very small amount of that money back?
ALSO:
what is the simplest way to explain how stock prices increase then?
In: Economics
Yes no matter which way you look at it.
The main question: what did you buy?
Is it an asset or part of COGS that will go into making a new product or service? Usually this expense will come back as revenue several times the amount of the expense (margin), though usually with a time delay. This is a smart way to spend money.
It is a pure expense? This will also affect the balance sheet, ultimately dragging down EBITDA / the bottom line. Since investors typically look at growth and profitability, and P/E ratios inform stock price, indirectly. The market can “choose” to adjust stock price based on financial results, but usually do.
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