SIE Understanding Products and Their Risks Question 1: Answer and Explanation

Question: 1

Which of the following is the main reason that a company issues stock?

• A. To increase diversification of ownership
• B. To raise capital for beginning or expanding business operations
• C. To lower the number of dividends to pay
• D. To take advantage of lower interest rates

Correct Answer: B

Explanation:

B: Raising capital to begin or expand business operations is the main reason for issuing stock. Choice A is not typically a concern of companies. Choice C would be a reason for repurchasing company stock. Choice D would be a reason for issuing bonds.