STOCK

STOCK

STOCK

What Is A Stock?

A stock is a security that represents
ownership in a public corporation. The owner of a stock is entitled to a
corresponding share of the assets of a company, if they were to be liquidated,
and is entitled to any benefits the company bestows upon its stockholders,
e.g., dividends, splits, etc.

A stock is also known as a share because the number of shares owned
determines the proportional ownership stake in the company. Two major types of
stock are common and preferred.

Common vs. Preferred Shares

Generally, owners of common stock can vote at shareholder meetings and receive dividends, i.e., payments based on company performance, typically, quarterly or annually. A company is not required to pay dividends, but some companies use these payments to entice investors to buy their shares.

Preferred stock owners often cannot vote at shareholder meetings, but are first in line to receive the other benefits of owning a stock. For example, if a company’s available cash for dividends is limited, preferred stockholders are the first to receive payments while common stockholders may get a reduced amount or no dividends at all. Preferred stockholders also have a stronger claim to company assets in the event of asset liquidation or disbursement of proceeds from the sale of a company.

 

Price appreciation is one of the major reasons for stock ownership. Stocks are traded on exchanges around the world with a varying degree of liquidity, depending on the currency, the exchange, and the stock itself.

Common vs. Preferred Shares

A public company that generates revenue is in a position to raise capital by selling shares, or stock, in the company. If the company does well, the value of the company’s stock rises as demand increases.

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