What is the effect of issuing common stock?

Issuing common stock has several significant effects on a corporation, and the choice accurately highlights one of the main characteristics associated with common stock. By issuing common stock, a company allows shareholders to gain ownership in the business. This ownership comes along with certain rights, such as voting rights in company decisions and the potential to receive dividends, which are payments made to shareholders from the company's profits. Shareholders benefit from this arrangement as they can influence corporate governance through their voting powers and financially gain through dividends if the company performs well and decides to distribute a portion of its earnings.

The other options do not accurately reflect what happens when common stock is issued. For instance, issuing common stock does not directly impact the total liabilities of the company; instead, it increases equity. It also does not provide fixed returns, as common stock is inherently variable — returns depend on the company’s performance and decisions made by its board of directors. Lastly, issuing common stock generally increases the number of shares available, rather than limiting them. This active offering of shares is aimed at expanding the company's capital base and allowing more investors to engage with the corporation.