FBLA Securities and Investments Practice Test 2025 – The Complete All-In-One Guide for Exam Success!

A primary market transaction refers to the initial process through which securities, typically stocks or bonds, are sold directly by corporations to investors. This is where a corporation raises funds by issuing new equity or debt instruments, allowing it to obtain the financial resources needed for operations, expansion, or other activities.

When a company goes public, it conducts an initial public offering (IPO) as part of a primary market transaction, making its stock available for the first time to public investors. This process is essential for businesses seeking to generate capital and is distinct from secondary market transactions, where existing securities are traded among investors without the involvement of the issuing company. Understanding this distinction is crucial, as it highlights the role of the primary market as the initial avenue for capital raising, separate from the trading activities that occur subsequently in the secondary market.