When a company has an initial public offering
A) the previous owner of the shares will bet the money and the buyer will get the shares.
B) the proceeds of the sale will not affect the company's balance.
C) the proceeds of the sale will increase the company's equity.
D) the proceeds of the sale will become a liability payable to the shareholders.

Question

Quizplus · Accepted Answer

When a company has an initial public offering (IPO), it means that it is offering shares of its stock to the public for the first time. The proceeds from the sale of these shares will increase the company's equity, as it is increasing the amount of capital invested in the company by its shareholders. Therefore, choice C is correct. Choice A is incorrect as the previous owner of the shares will receive the money, not bet it. Choice B is incorrect as the proceeds of the sale will definitely affect the company's balance. Choice D is incorrect as the proceeds of the sale do not become a liability, but rather an asset, for the company.

When a Company Has an Initial Public Offering