Final answer:
Firms only receive funds from the sale of their stock directly during an IPO or secondary offerings. Once stocks are in the secondary market, the company does not financially benefit from sales between investors.
Step-by-step explanation:
Firms that transact in Investment Company Shares must transmit payments received from customers to the Investment Company. When buying stock during an Initial Public Offering (IPO) or a secondary offering, the firm directly receives funds from the investors. However, once the shares are on the secondary market, such as stocks of General Motors being bought and sold by current shareholders, the company does not receive any financial return from these transactions akin to a house being sold by its current owner rather than the builder.
An IPO is crucial as it allows a firm to raise capital needed to repay early-stage investors, like angel investors and venture capitalists, and provides the financial capacity for significant expansion. In contrast, subsequent transactions between investors do not directly finance the company. This pivotal role of public offerings highlights the specific conditions under which a firm benefits financially from the sale of its stock.