Final answer:
A corporation typically sells its stock directly to investors through a subscription contract basis. Anyone who purchases stock shares becomes a shareholder and partial owner of the corporation.
Raising capital through public offerings allows many to share in the company's ownership without incurring regular interest payments as loans or bonds would require.
Step-by-step explanation:
A corporation often sells its stock directly to investors on a subscription contract (installment) basis. Those who buy the stock become the owners, or shareholders, of the firm.
Stock represents ownership of a firm; that is, a person who owns 100% of a company's stock, by definition, owns the entire company. The stock of a company is divided into shares.
Corporate giants like IBM, AT&T, Ford, General Electric, Microsoft, Merck, and Exxon all have millions of shares of stock. In most large and well-known firms, no individual owns a majority of the shares of the stock.
Instead, large numbers of shareholders - even those who hold thousands of shares - each have only a small slice of the overall ownership of the firm.
Corporations may raise funds to finance their operations or new investments by raising capital through selling stock or issuing bonds. Issuing stock involves selling off company ownership to the public and becoming responsible to a board of directors and the shareholders.
A public offering allows members of the public to buy into the company and thus claims a part of the company's profits — and losses. Unlike taking a loan or issuing bonds, this method of raising capital does not commit the company to scheduled interest payments, and it distributes ownership among many individuals or entities.