The share price of a company is important in determining its performance. There are various changes that occur on the share price of a company. These changes can be explained by major events that happen within the course of the financial period (Martin 2012). The movement of share prices is usually monitored in stock exchange markets in order to make comparisons with other companies. This enables financial analysts to predict the future performance of companies. The stock prices may also be an indication of whether the value of a company is high or low.
Flybe Company is an organization that provides air services for the people living in the United Kingdom (Moses 2012). The share price of this company has been fluctuating from time to time. The changes in the share price of this company can be explained by the changing business environment. In addition, there are certain events that have affected the stock price during the financial period. The trends of the share price are not constant as the stock prices have been moving up and down depending on the accounting period.
In the previous financial period, there are certain events that occurred in the air industry. Most of these events affected the financial markets. One major event during this period was the franchises that were arranged between Flybe Company and other large companies like Etihad and British Airways (Martin 2012). These agreements were meant to broaden the business of Flybe with a view to open up its market share. Etihad and British Airways are one of the most reputable air companies in serving the people of Europe. After signing this agreement, investors had several expectations on the profits of Flybe Company. If a smaller company is associated with a major company, more customers will be attracted due to the high reputation of the larger companies. Due to the expectations made by the investors, Flybe Company had the advantage of gaining high earnings that yielded higher earnings per share. As a result, the share price increased during the month of June 2012.
The performance of the air industry made a large impact on the share price of Flybe Group. During the half year period of the financial period of 2012-2013, the performance of this industry was excellent. There were many customers who were travelling to various destinations owing to improved international relations. International relations encouraged people to travel to other countries. When other major airlines had exhausted their customer capacity, the surplus went to the remaining companies that offered air services. During this period, Flybe had many customers, explaining why the stock prices were generally high.
The law of supply and demand is important in explaining the movement of share prices in this company. When there is a high demand for air services, there will be high revenue realized by the company. From June 2012, the demand for air travel within England was high due to increased business activities in the country (Morris 2012). Due to this, there were increased earnings for the company. This had a positive effect on the share price of the company. There was an increase in the number of customers for this company and this boosted the overall sales.
The increase in the share price was only realized during the period between June and August. The share price of the company started to decline after certain factors started making an impact on the profitability of the company. For instance, the management of the company announced that the price of fuel was increasing and this was affecting the overall costs of the company. The increase in costs translated to lower profit margins. This eventually affected the overall profit. This is a partial explanation of why the stock prices fell as from August.
The movement of stock prices in the financial market can be explained by the use of a diagram. The following diagram shows the trends of the share price of Flybe Company and their volume from the year 2012.
The above diagram shows that it is somehow difficult to predict the future price of the shares. This is mainly due to the changing trends of the stock price. However, this might be possible for experts who are known to speculate and perform speculation in order to gain profits.
In the above diagram, the share price in January was below 50. This, according to the management was due to increase in staffing costs. On January 23rd, the management of this company announced that the operations of the airport would be affected. The company was ready to lay off many workers who worked for the airline. The main reason for this was that there were increased costs in the company and this compromised its profitability. This news came as a shock to the workers of the company. According to the management, the laying off of these workers would help in achieving the long term goals of the company. A decrease in operating costs usually leads to increased profitability (Polycarp 2012).
In conclusion, the share price of a company may affect its reputation in the global business environment. The management of Flybe Company should evaluate the factors that affect the share price in order to enhance positive change. High share prices are usually associated with good performance. Therefore, the company should improve mechanisms that enhance the increment of the share price in order to increase its customer base. Finally, investors should study the movement of share prices in order to come up with effective investment decisions. This will prevent them from incurring losses in the financial markets.
References
Martin, M. 2012. Share Prices and Their Implications in Companies. London. Palgrave Macmillan.
Johnson, K. 2011.Financial Markets and Stock Movement. Oxford. Oxford University Press.
Polycarp, S. 2012. London Financial Markets. London. Palgrave Macmillan.
Moses, R. 2012. Flybe Group. New York. Mc-Grady.
Derrick, R. 2011. The Study of Financial Markets. California. Logic Publishers.
Morris, M. 2012. Factors Affecting Share Prices. Oxford. Oxford University Press.
