Final answer:
Firms buy common stock of other firms to become shareholders and potentially earn a return on their investments. It also allows firms to have a say in the management and decision-making processes of the other firm.
Step-by-step explanation:
When firms buy common stock of other firms, they are essentially purchasing a small slice of ownership in that firm. By buying the stock, the firms become shareholders of the other firm. However, it's important to note that when stock is bought and sold, the firm that originally issued the stock does not receive any financial return.
Buying common stock of other firms allows firms to diversify their investments and potentially earn a return on those investments. It also provides firms with the opportunity to have a say in the management and decision-making processes of the other firm. Additionally, by acquiring common stock, firms may be able to gain a competitive advantage or strengthen their market position through strategic alliances or partnerships.