What is Prospectus?

A prospectus, as it relates to finance, is a formal disclosure document that describes an investment offering to potential buyers. It typically provides investors with details about a specific stock, mutual fund, bond, or another type of investment describing the company's business model, financial statements, a list of material properties, and other important information. A prospectus is generally distributed by underwriters and brokerages to potential buyers who may purchase a security through an Initial Public Offering (IPO).