Common stock

Common stock is a form of corporate equity ownership, a type of security. It is called "common" to distinguish it from preferred stock. In the event of bankruptcy, common stock investors receive their funds after preferred stock holders, bondholders, creditors, etc. On the other hand, common shares on average perform better than preferred shares or bonds over time.^[1]

Common stock is usually voting shares, though not always. Holders of common stock are able to influence the corporation through votes on establishing corporate objectives and policy, stock splits, and electing the company's board of directors. Some holders of common stock also receive preemptive rights, which enable them to retain their proportional ownership in a company should it issue another stock offering. There is no fixed dividend paid out to common stock holders and so their returns are uncertain, contingent on earnings, company reinvestment, efficiency of the market to value and sell stock.^[2]

Additional benefits from common stock include earning dividends and capital appreciation.

It can also be known as Ordinary Shares.

See also

• Shares authorized
• Shares issued
• Shares outstanding
• Share capital
• Treasury stock
• Capital surplus
• Shareholders' equity

References

1. ^ "commonstock". http://www.investopedia.com/terms/c/commonstock.asp. 
2. ^ "Characteristics of common stock". http://www.wfu.edu/~palmitar/Law&Valuation/chapter%204/4-3-1.htm. 

External links

• Common Stock vs. Preferred Stock