Why do companies issue stock?
A)It allows the owners to raise capital without having to borrow.
B)It allows the owners to share the risk of failure.
C)It allows the owners to turn an illiquid asset into a liquid one.
D)All of these are true.

Question

Quizplus · Accepted Answer

Companies issue stock for a variety of reasons, but the three options listed are all common ones. By issuing stock, a company can raise capital from investors without incurring debt or relying solely on profits. It also allows shareholders to spread the risk of failure, as they only stand to lose the value of their investment rather than being personally liable for the company's debts. Finally, owning stock makes it much easier to buy and sell shares of ownership in the company, creating a more liquid asset than, say, real estate or a closely held business.

Why Do Companies Issue Stock