Publicly Traded Companies An Initial Public Offering (IPO) is a major milestone

Question

Publicly Traded Companies

An Initial Public Offering (IPO) is a major milestone for a company. This is a very expensive and time consuming process. It does not come without a lot of forethought and judicial weighing of the pros and cons.
We will start this conversation by looking at some of the reasons why a company would decide to take the steps to become a publicly traded corporation. What pros and cons have to be weighed?

Instructions:  there are a number of contributions possible for each of the elements.  Each student should offer a contribution that has not already been posted by a classmate.  

Use the numbers for each element to organize your initial post.  

List one way a company would benefit from an IPO. Explain in one paragraph.

List one use of additional capital. Explain the benefit in one paragraph.

Many changes in reporting standards have been enacted as a result of financial scandals. Identify one specific change in reporting standards or requirements for a publicly traded company and explain why this is important.

NOTE: The Sarbanes-Oxley Act is the most frequently mentioned change. It contains many individual provisions. Break it down to one provision that has not been mentioned by a classmate. There are a number of more recent changes to select from as well.

Explanation / Answer

A privately held organization would only go public, if it needs funds to expand its business and grow its value and the quantum of required funds is so high that it cannot be arranged via any other source. Funds can basically be raised either via debt or equity. Both these sources have their own pros and cons. Debt is a cheaper source compared to equity, however it creates an obligation for the borrowing entity. The biggest advantage of an IPO is to raise capital for an amount, which is otherwise very difficult to arrange due to multiple reasons such as quantum of funds, size of firm itself, and limited available debt.

The primary use of capital raised via IPO is to invest the raised funds into business expansion leading to higher growth and stronger bottom line.

Only one question per post is allowed under Chegg Policy, hence please post the second question separately.

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