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Chapter 17: Q.14 (page 426)

When do firms receive money from a stock sale in

their firm and when do they not receive money?

Short Answer

Expert verified

When a company's stock is sold on the primary market in an IPO, the company receives money.

Step by step solution

01

Step 1. Definition

A financial security that represents the ownership of a fraction of the company is known as a stock or share.

02

Step 2. Explanation

A firm receives money when it sells its own stock to the public through an initial public offering (IPO). Here the public can be a company, a person, etc. When the stock is resold in the secondary market, in this situation the firm doesn’t receive money instead the person who sold receives the money.

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