Stock prices

Q. Is a company with a $75 stock price bigger and financially healthier than one with a $25 stock price? — S.K., Midland, Michigan

A.

Not necessarily. A stock price alone doesn’t tell you very much. You need more information, such as how many shares there are: If the first company has just 1 million shares, its value would be $75 million, while if the second company has 1 billion shares, it would be valued at $25 billion. Another useful measure might be how much income the company has been earning per share.

To get a sense of a company’s financial health, check its financial statements, such as its balance sheet and income statement. You can see, for example, how much cash and debt it has and how quickly its revenue and earnings are growing.

A company with slowing sales and rising debt is not likely to be attractive at any price. Instead, a promising investment would be growing briskly, widening its profit margins and gaining market share — all while seeming to be undervalued by other investors. That’s true no matter what its share price.

Remember: A $2 stock can really be “worth” only $0.10 per share, while a $500 stock might be worth $1,000 — and be headed there, too.

Q. What’s an “orphan drug”? — A.H., Greenville, North Carolina

A. It’s a drug developed to treat a rare disease or condition — one that affects fewer than 200,000 people in the United States.

As you might imagine, pharmaceutical companies are unlikely to pursue treatments for such conditions without millions of customers helping them recoup their development costs. That’s why the

Orphan Drug Act of 1983 was passed, to provide them financial incentives to do so. Consider a trust

You may associate the term “trusts” with wealthy people, and it’s true that many upper-income folks include one or more trusts in their estate plans. But people in the middle class may benefit from using trusts, too.

A trust is a legal document that can make sure your financial assets are passed on to your beneficiaries according to your wishes — during your lifetime or afterward. The beneficiaries might include your spouse, children, other family members, charities or pets. The financial assets in the trust are managed either by you or by one or more trustees, which can be trusted people or organizations.

With a trust, you can specify that assets go to named beneficiaries at certain times, such as upon your death or when a child reaches a specific age (say, 30). It can help you distribute the rest of your property, too. And while a traditional will can do that, wills take effect only after you die. A trust can establish arrangements if you’re temporarily or permanently disabled and unable to manage your assets.

Trusts can help you and your beneficiaries postpone or avoid some taxes, and assets that are passed on through a trust are often excluded from the probate process. That can make transfers of assets faster and less costly and can keep your arrangements more private.

There are many kinds of trusts, but they’re typically either revocable or irrevocable. A revocable trust, also known as a living trust, is one that you can change or cancel (revoke) until you die. An irrevocable one is generally permanent — but can offer more tax advantages.

Trusts tend to be more complicated than wills and often cost more to create. If you’re considering a trust, read more about them, perhaps in “The Complete Book of Wills, Estates & Trusts (4th Edition): Advice That Can Save You Thousands of Dollars in Legal Fees and Taxes” by Alexander A. Bove Jr. and Melissa Langa (St. Martins Griffin, $20). And consider consulting a professional, such as an estate lawyer.