alleryStart learning →What is an initial public offering?
AA firm's first sale of stock to the public
BA firm's first sale of bonds to its bankers
CA firm's first payment of a cash dividend
DA firm's first purchase of its own shares
Answer & Solution
Correct answer: A. A firm's first sale of stock to the public
1. A company's first sale of stock to the public is called an initial public offering.
2. It often lets existing stockholders, usually employees, family and friends who bought privately, earn big profits on their investment.
3. Companies already public can issue and sell additional shares of common stock to raise further equity.
4. Buying back its own shares or paying a first dividend are later decisions and have nothing to do with going public.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 16 "Understanding Financial Management and Securities Markets", section 16.5 Equity Financing_
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