If Gina buys stock in a company, what does this mean from an accounting perspective?

• A. Gina has lent money to the company as a creditor.
• B. Gina is now responsible for the company's debts.
• C. Gina has become a part-owner (shareholder) of the company.
• D. Gina has purchased inventory from the company.

Answer: (C)

Verified step by step guidance

1. Understand the concept of stock ownership: When an individual buys stock in a company, they are purchasing a share of ownership in that company. This makes them a shareholder.
2. Clarify the role of a shareholder: Shareholders are part-owners of the company and have a claim on its assets and earnings proportional to the number of shares they own.
3. Distinguish stock ownership from other financial relationships: Buying stock does not mean lending money to the company (as a creditor) or assuming responsibility for the company's debts. It also does not involve purchasing inventory from the company.
4. Explain the implications of stock ownership: Shareholders may receive dividends (a share of the company's profits) and have voting rights in corporate decisions, depending on the type of stock they own.
5. Summarize the correct answer: Gina has become a part-owner (shareholder) of the company by purchasing stock, which gives her certain rights and responsibilities as outlined by the company's governance structure.