Which term refers to the practice of inflating a corporation's assets and profits before selling stock?

The practice of inflating a corporation's assets and profits before selling stock is best referred to as "watered stock." This term originated in the late 19th century when companies would issue stock that was not representative of the actual value of the company's assets. Essentially, the company would artificially boost the perceived worth of its assets to attract investors and inflate stock prices before selling shares. This practice misleads investors about the company’s true financial health and can lead to significant financial losses for those who invest based on inflated valuations.

Market manipulation involves a broader range of deceptive practices intended to distort the perception of a security's value and is not limited specifically to the inflation of assets or profits. Capital investment refers to funds invested in order to improve a company’s operations or products, and collective bargaining is a negotiation process between employers and employees regarding working conditions and pay. Understanding these distinctions clarifies why "watered stock" is the term most accurately capturing the described practice.