Literally millions of man-hours have gone into the study of stock price in the real world, and many correlations between factors as varied as “fundamentals” like profits and “psychologicals” like news stories have been identified.

Capstone®, however, is an educational tool. It takes a simple approach to stock price, highlighting the basic drivers. In Capstone®, stock price is a function of:

• Book value is
  
• Earnings per share is
  
• Dividend per share
• Emergency loans penalties Book Value

There are only four ways to affect book value:

• Issue stock
• Retire stock
• Retain profits
• Pay dividends

Generally, book value climbs if management keeps the profits as retained earnings and does not pay dividends. Historically, in the days when a balance sheet reflected the wealth producing assets like land and factories, book value was a fair estimate for the value of stock. In today’s world, off balance sheet assets like customer lists, brand equity, or access to markets swamp book value.