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Chapter 17: Q.32 (page 426)

Explain why a financial investor in stocks cannot earn high capital gains simply by buying companies with a demonstrated record of high profits.

Short Answer

Expert verified

Because price per share increase is incredibly less.

Step by step solution

01

Concept Introduction 

Capital Gain: The difference of terms and buying price of a share.

02

Explanation of Solution 

The company with high profits will lure many investors to boost more financial capital from the market. that the number of shareholder increases and dividend get distributed among all which at individual level are very less percentage. the value per share increases in proportion to dividend which is able to be obviously very less. hence financial gain are less.

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