Question

What is the primary reason to issue stock?

Answer 1

The primary reason a company issues stock is to raise funds to expand the business. That may mean building more factories or stores, or developing new products, etc. 

Issuing stock takes a company from being a private company to a public company, which has more regulations it must follow and reporting obligations to its stockholders. 

An example of a company moving from private to public with an initial public offering of stock would be The Home Depot stores. The company was founded in 1978, and had just three stores in Georgia in 1981 when it went public and issued stock. Today, The Home Depot has over 2,200 stores in three countries. So going public was a big step forward for the company.

Answer 2

The primary reason to issue stock raise money that will make the company grow bigger.

Further Explanations:

Stock is the equity investment representing part ownership in a firm entitling to share the corporation’s assets and earnings. In present days ownership of assets is recorded electronically and held by brokerage firm. Usually, they are of two types:

i) Common stock- Common stock are the shares that entitling the holder's assets depending upon the future of the company. We can take example that if a company has 100 shares, then each share equals one percent of the company’s ownership.

ii) Preferred Stock- These stocks entitles a holder a particular dividend of the company whose payment is given priority over common stocks.  

In the same way, Issuing stock means to transform a private company to a public company. A public company has more regulators and obligations against its stockholders. We can take an example of the “Home Depot Store”  having 3 stores during its initial age. It moved to Public company in 1981 and presently it is having more than 2,200 stores.  

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Answer Details  

Grade: High School

Subject: History

Chapter: Stock

Keywords: Stock, investment representing, ownership, firm, corporation’s, assets, earnings, Common stock,Preferred Stock, company,100 shares,Issuing stock, private company, public company, Home Depot Store.