What is Common Stock?
Common stock represents ownership interests in corporations.
How does Common Stock work?
The most prominent characteristics of common stock are that they entitle the shareholder to vote on corporate matters (typically, the shareholder gets one vote for every share he or she owns, though that is not always the case) such as whether the company should acquire another company, who the board members should be and other big decisions. Common stock also often comes with preemptive rights, which means the shareholder has a "right of first refusal," or first dibs on buying any new stock the company tries to issue.
Perhaps the most important attribute of common stock is that their holders are the last in line when it comes to getting their money back. If the company goes bankrupt and has to sell off its assets, the cash from the asset sale first goes to lenders, employees and lawyers. The shareholders get whatever is left (which is usually nothing, or just a few pennies for every dollar they originally invested).
Why do Common Stocks matter?
If you own one, 100 or 100 million stock in a company, you're an owner of the company. There are different kinds of stocks, and their classifications largely depend on the rights they confer on the holder. Investors evaluate these categories based on their objectives, and they look for stocks that meet those objectives. The two most popular categories of stock are common stock and .of
Although preferred stock owners don't usually get any voting rights, they usually receive a steady dividend and their claim to the company's assets "outrank" the common stockholders' claims (i.e., in the event of bankruptcy, the company must pay off lenders, preferred shareholders, employees and lawyers before the common shareholders get anything).
Personalized Financial Plans for an Uncertain Market
In today’s uncertain market, investors are looking for answers to help them grow and protect their savings. So we partnered with Vanguard Advisers -- one of the most trusted names in finance -- to offer you a financial plan built to withstand a variety of market and economic conditions. A Vanguard advisor will craft your customized plan and then manage your savings, giving you more confidence to help you meet your goals. Click here to get started.
Read This Next
The cup-and-handle pattern is aptly named because it resembles a teacup with a handle. On a ...Read More →
Where did all the jobs go? And where did all the good jobs go? It's a question 13.9 million unemployed Americans and countless disgruntled workers have wondered since the "Great...Read More →
As you may already know, the double top is a major bearish reversal pattern. It marks a significant,...Read More →
Prepaid cards, also known as reloadable debit cards, have become popular consumer financial products. Accepted everywhere traditional credit and debit cards are taken, prepaids offer access...Read More →