Question

Which of the following statements is NOT CORRECT? a. When a corporation's shares are owned by a few individuals who own most of the stock or are part of the firm's management, we say that the firm is "closely, or privately, held." b. When stock in a closely held corporation is offered to the public for the first time, the transaction is called "going public," and the market for such stock is called the new issue market. c. "Going public" establishes a firm's true intrinsic value and ensures that a liquid market will always exist for the firm's shares. d. Publicly owned companies have sold shares to investors who are not associated with management, and they must register with and report to a regulatory agency such as the SEC. e. It is possible for a firm to go public and yet not raise any additional new capital.

Answer 1

Answer: The following statements is not correct: "Going public" establishes a firm's true intrinsic value and ensures that a liquid market will always exist for the firm's shares.

This states the condition where a private organization starts initial public offering, and therefore become a publicly traded and closely-held entity. Enterprises go public to increase capital in order to expand.

Going public has nothing in inclination with organization's true intrinsic value or its liquid market.