What is the benefit (to the company) of an Initial Public Offering? Select one.

Question

BlackTom AI · Accepted Answer

To evaluate the question, I’ll look at what each option asserts about the benefits of an Initial Public Offering (IPO) for a company.
Option 1: 'All of the above' claims that every listed benefit is true. This invites checking each of the other options for validity.
Option 2: 'Provide liquidity (ability to sell shares/ownership) for early investors'—an IPO typically offers liquidity to early investors by creating a public market for the stock, allowing them to sell their shares more easily. This is a well-established benefit of going public.
Option 3: 'Now millions of new shareholders'—an IPO expands the shareholder base by inviting broad public participation, which is a direct consequence of listing shares on a public exchange. While not all IPOs attract millions, this statement captures the potential for a large increase in holders, depending on demand and pricing.
Option 4: 'Raise Capital'—one of the core motivations for an IPO is to raise additional capital for the company, which can fund growth, acquisitions, debt repayment, or other corporate needs.
Evaluating each option shows that the first option hinges on the truth of the others; options 2, 3, and 4 describe plausible and commonly cited benefits of an IPO. If 2, 3, and 4 are true (or at least plausible as benefits), then Option 1 ('All of the above') correctly encompasses all of them. A critical reader should note that while liquidity and capital raise are standard outcomes, the extent to which millions of new shareholders participate (Option 3) varies by IPO size, demand, and market conditions, but it remains a legitimate potential benefit in many IPO scenarios.
In short, option 2 explains liquidity benefits, option 3 explains widening ownership, and option 4 explains capital raising. Since these are all valid benefits of an IPO, the combined statement 'All of the above' appropriately consolidates them into one choice.

KSB-111-003.2025F Exam #2 - KSB 111 (Liederman)

What is the benefit (to the company) of an Initial Public Offering? Select one.

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