Which statement about investor-owned (for-profit) corporations is incorrect?

Which statement about investor-owned (for-profit) corporations is incorrect?

• A. The primary goal is to maximize shareholder value
• B. Stockholders can trade shares on public markets
• C. When stock is sold, the company receives the proceeds
• D. The board represents stockholders

Answer: (C)

The key idea is how money moves when stock changes hands. In investor-owned, for-profit corporations, trading existing shares on public markets is a secondary market activity. When someone sells shares to another investor, the cash goes to the seller, not to the company. The company only receives cash when it issues new shares to raise capital (a primary offering) or raises funds through other securities. So claiming that the company gets the proceeds when stock is sold is incorrect. By contrast, the other statements fit typical structure: the primary goal is to maximize shareholder value, stockholders can trade on public markets, and the board represents stockholders and oversees their interests.

The key idea is how money moves when stock changes hands. In investor-owned, for-profit corporations, trading existing shares on public markets is a secondary market activity. When someone sells shares to another investor, the cash goes to the seller, not to the company. The company only receives cash when it issues new shares to raise capital (a primary offering) or raises funds through other securities. So claiming that the company gets the proceeds when stock is sold is incorrect. By contrast, the other statements fit typical structure: the primary goal is to maximize shareholder value, stockholders can trade on public markets, and the board represents stockholders and oversees their interests.