Common Stock
Common stock is equity in a company that often has a lower value and fewer rights than preferred shares.
What is common stock?
Common stock is a type of investment that represents ownership in a company. When you acquire a share of common stock, you become a shareholder in the company and have the potential to earn a return on your investment through dividends and capital appreciation.
What is the difference between common stock and preferred stock?
The main difference between common stock and preferred stock is that common shareholders have voting rights and the potential to earn a greater return, but also bear more risk. Preferred shareholders, on the other hand, typically have no voting rights but have a higher claim on assets and earnings, and often have a fixed dividend.
What rights do common stockholders have?
Common stockholders have the right to vote on corporate matters such as the election of the board of directors and major business decisions. They also have the potential to earn a return on their investment through dividends and capital appreciation.
How does a stock split impact common stockholders?
A stock split is when a company increases the number of shares outstanding by issuing more shares to existing shareholders. This has no effect on the overall value of a shareholder's investment, but it does change the number of shares they own and the price per share. For example, if a company does a 2-for-1 stock split, a shareholder who previously owned 100 shares would now own 200 shares, but the value of their investment would remain the same. It's often done to make the stock price more affordable for small investors.
