Multiple Choice
Which of the following best distinguishes a public offering from a private placement in the context of investments in securities?
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7. Receivables and Investments
Introduction to Investments in Securities
Multiple Choice
Which of the following statements about the stock market is true?
A
Only government-owned companies can be listed on the stock market.
B
Stock prices remain constant throughout the trading day.
C
The stock market allows companies to raise capital by issuing shares to the public.
D
All stocks traded on the stock market guarantee a fixed annual return.
Verified step by step guidance1
Understand the purpose of the stock market: The stock market is a platform where companies can raise capital by issuing shares to the public. This allows businesses to fund their operations, expand, or invest in new projects.
Evaluate the first statement: 'Only government-owned companies can be listed on the stock market.' This is incorrect because private companies, not just government-owned ones, can also be listed on the stock market.
Evaluate the second statement: 'Stock prices remain constant throughout the trading day.' This is incorrect because stock prices fluctuate throughout the trading day based on supply and demand, company performance, and market sentiment.
Evaluate the third statement: 'The stock market allows companies to raise capital by issuing shares to the public.' This is correct because one of the primary functions of the stock market is to enable companies to raise funds by selling ownership stakes (shares) to investors.
Evaluate the fourth statement: 'All stocks traded on the stock market guarantee a fixed annual return.' This is incorrect because stock returns are not guaranteed and depend on market performance, company profitability, and other factors.
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