Question

Seedling Plant Science invented a drought resistant grass seed that only needs watering three times each year. In order to expand distribution worldwide, the company whose product produces lush green foliage needs a large amount of funding—fast! The handful of seed scientists that own the company decide to offer shares of stock to general investors. This first-time offering is a(n)___________.

Answer 1

Answer: Initial public offering (IPO)

Explanation:

Initial public offering (IPO) is also known as stock market launch, it is the selling of a company's shares to public investors in other to raise capital. This is also termed "going public" or "floating" because it is the first time a company permits stockholders, which means the company was initially private- owned but has now gone public.

A company becoming IPO allows it to grow, expand and raise capital.

Advantages of IPO.

• It helps a company enlarge their equity base.

• It helps a company have easy access to capital.

• It creates multiple sources of financing such as equity, cheap loans from bank etc.

Disadvantages of IPO.

• Increased in cost which includes legal cost, marketing, communication,and accounting cost, etc.

• It requires more time, attention, and effective management skills.