Final answer:
Yes, it's true that corporations sell common stock to finance their business start-up costs, expansion, and ongoing activities. This allows them to raise capital and share the company's profits and losses with the shareholders. However, issuing stock involves legal and regulatory compliance costs.
Step-by-step explanation:
Corporations sell common stock to finance their business start-up costs and help pay for expansion and their ongoing business activities. This is a true statement. When corporations issue stock, they are raising capital to fund their operations, invest in new projects, or pay for other business-related expenses.
Those who purchase the stock become shareholders and essentially part owners of the company. This method of financing allows corporations to access large amounts of capital without the need to repay the money like they would with a loan.
Issuing stock increases a company's visibility in the financial markets and can lead to substantial financial capital for expansion. If successful, the directors may decide on dividend payouts or reinvest the profits. However, issuing and trading stock requires the expertise of investment bankers and lawyers and involves compliance with various regulations, including those set forth by the Securities and Exchange Commission (SEC).