3) When you buy a stock of Apple in secondary market, Does Apple acquire new fund?...

3) When you buy a stock of Apple in secondary market, Does Apple acquire new fund? How else does transaction of the share in secondary market affect a corporation?

Expert Solution

Sale and purchase of stocks or shares in secondary market involves transaction between two investors who are dealing in already issued stock or share.

Since, stock or share is already issued and is undergoing re-sale, issuing company does not acquire any funds on re-sale.

So, when a person buys a stock of Apple in secondary market, Apple does not acquire new fund.

Transactions involving shares or stocks of a corporation in secondary market indicates liquidity of the stocks of the corporation.

This liquidity enhances the confidence of investors to invest fresh funds in corporation as they know that they can encash their investment later in secondary market due to thriving trade in stocks of the said corporation.

This kind of liquidity accorded by the secondary market also helps corpoartion in issuing new stocks for fund generation at lower cost.

Thus, transaction in secondary market helps the firm in raising low-cost funds.

Rahul Sunny answered 2 years ago

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