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Because Adobe trades volume is more than 14 times its sales, there is a risk. Explain...

Because Adobe trades volume is more than 14 times its sales, there is a risk. Explain the risk in terms of economics.
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Answer #1

Trading volume and sales are used to calculate Price to sales ratio. It means that how much investors are willing to pay for the one dollar of sales. It is 14 in the given scenario. It will create inflated price or overpricing of the Adobe stock. It will increase the standard deviation of the stock and investors can suffer variability in return upon the investment in Adobe. In terms of economics, it can disturb the investment climate and foreign investors can move away with the investments. It is the result of speculating trading for Adobe. It can cause falling of the market indices and investor confidence will decrease. It will create a macroeconomic problem due to the risk associated with the higher than the expected trading volume.

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