Managers should not focus on the current stock value because doing so will lead

Question

Managers should not focus on the current stock value because doing so will lead to overemphasis on short-term profits at the expense of long-term profits.

In your post, explain what is meant by this statement.  Describe how management might decide whether to focus on short term or long term goals and how that decision impacts the organization.  Next, using the financial balance sheet as displayed in the text, compute an example of how focusing on short term profits can be detrimental to long term profits. Share your opinion regarding whether you feel it

Explanation / Answer

Managers don't ordinarily focus on the current stock value at all. Standard business thought has it that when the company is well run, the stock price will eventually reflect strong execution of a sound business plan built on a solid business model.

Managers don't have much impact on a company's share price, partly because their decisions won't quickly and directly demonstrate a knee jerk response setup, and partly because their purview isn't to control the share buying public, but they have a responsibility to strive for effective management of their business. Again, the only thing that ever makes a stock rise is positive execution, all other things being equal.

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