As an investor who holds shares of the company, you have part ownership of company.When you invest in a company's shares, you become a 'part owner' of the company and you get to share a part of the company's profit as dividend.
Thus, if the company does well and earns more profit, you in turn to well If the company reinvents its earnings towards future growth, you are assured of higher dividends in the future.Meanwhile, if you lend money to the company by investing in its bonds, the company uses part of its earnings to repay interest and principle on the bonds.
The more earnings the company has, the more secure you can be that the company will be able to make your interest payments. So, company earnings are important to you because you make money when the business you invest in, makes money.
Monday, April 6, 2009
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