Certified Management Accountant 2025 – 400 Free Practice Questions to Pass the Exam

When a company goes public, it offers its shares to the general public through an initial public offering (IPO). This process often involves significant changes in the ownership structure of the company. One of the main disadvantages that emerges from going public is the loss of control by management.

Once a company is publicly traded, it is subject to the market's demands and pressures. Shareholders, who now own a portion of the company, can influence decisions and may expect certain returns on their investments. This shift means that management must account for the interests and expectations of a larger group of stakeholders rather than a small number of private owners. Decisions that were once made with less oversight may now require approval from the board and can be influenced by shareholder votes. This reduction in direct control over business operations can limit management's ability to execute their vision for the company without external interference.

The other choices, such as increased management control, reduced reporting costs, and higher stock prices, do not reflect the typical challenges a company faces when going public. Increased management control is not a realistic outcome, as management often finds itself balancing more interests, while reduced reporting costs is unlikely because public companies generally face greater regulatory scrutiny and higher costs related to compliance and reporting. Higher stock prices can occur,