HOME

TheInfoList



OR:

Common stock is a form of corporate
equity Equity may refer to: Finance, accounting and ownership *Equity (finance), ownership of assets that have liabilities attached to them ** Stock, equity based on original contributions of cash or other value to a business ** Home equity, the diff ...
ownership, a type of
security" \n\n\nsecurity.txt is a proposed standard for websites' security information that is meant to allow security researchers to easily report security vulnerabilities. The standard prescribes a text file called \"security.txt\" in the well known locat ...
. The terms voting share and ordinary share are also used frequently outside of the
United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...
. They are known as equity shares or ordinary shares in the UK and other
Commonwealth A commonwealth is a traditional English term for a political community founded for the common good. Historically, it has been synonymous with "republic". The noun "commonwealth", meaning "public welfare, general good or advantage", dates from the ...
realms. This type of share gives the
stockholder A shareholder (in the United States often referred to as stockholder) of a corporation is an individual or legal entity (such as another corporation, a body politic, a trust or partnership) that is registered by the corporation as the legal own ...
the right to share in the profits of the company, and to vote on matters of
corporate A corporation is an organization—usually a group of people or a company—authorized by the state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal context) and r ...
policy Policy is a deliberate system of guidelines to guide decisions and achieve rational outcomes. A policy is a statement of intent and is implemented as a procedure or protocol. Policies are generally adopted by a governance body within an orga ...
and the composition of the members of the
board of directors A board of directors (commonly referred simply as the board) is an executive committee that jointly supervises the activities of an organization, which can be either a for-profit or a nonprofit organization such as a business, nonprofit orga ...
. The owners of common stock do not own any particular assets of the company, which belong to all the shareholders in common. A corporation may issue both ordinary and preference shares, in which case the preference shareholders have priority to receive
dividend A dividend is a distribution of profits by a corporation to its shareholders. When a corporation earns a profit or surplus, it is able to pay a portion of the profit as a dividend to shareholders. Any amount not distributed is taken to be re-i ...
s. In the event of liquidation, ordinary shareholders receive any remaining funds after bondholders, creditors (including employees), and preference shareholders are paid. When the liquidation happens through
bankruptcy Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debto ...
, the ordinary shareholders typically receive nothing. Since common stock is more exposed to the risks of the business than bonds or preferred stock, it offers a greater potential for capital appreciation. Over the long term, common stocks tend to outperform more secure investments, despite their short-term volatility.


Shareholder rights

Owners of a company's common stock have rights enumerated in its articles, bylaws and applicable corporate law. These can include the right to vote on directors, officers, compensation plans and major business actions such as acquisition or dissolution. Many companies also allow them to submit and vote on proposals to amend the bylaws or to mandate actions by the board.
Pre-emption right A pre-emption right, right of pre-emption, or first option to buy is a contractual right to acquire certain property newly coming into existence before it can be offered to any other person or entity. It comes from the Latin verb ''emo, emere, emi, ...
s and
shareholder rights plan A shareholder rights plan, colloquially known as a "poison pill", is a type of defensive tactic used by a corporation's board of directors against a takeover. In the field of mergers and acquisitions, shareholder rights plans were devised in the ...
s regulate the terms under which new shareholders can affect the interests of existing ones. Shareholders have the right to request access to the company's financial records, the list of shareholders, and other records that they legitimately require to fulfill their ownership duties.


Classification

Common/Equity stock is classified to differentiate it from preferred stock. Each is considered a
stock class In finance, a share class or share classification are different types of shares in company share capital that have different levels of voting rights. For example, a company might create two classes of shares class A share and a class B share whe ...
, with different series of each issued from time to time such as Series B Preferred Stock. Nevertheless, using "Class B Common Stock" is a common label for a super-voting series of common stock.


See also

*
Capital surplus Capital surplus, also called share premium, is an account which may appear on a corporation's balance sheet, as a component of shareholders' equity, which represents the amount the corporation raises on the issue of shares in excess of their par ...
*
Common stock dividend A common stock dividend is the dividend paid to common stock owners from the profits of the company. Like other dividends, the payout is in the form of either cash or stock. The law may regulate the size of the common stock dividend particularl ...
*
Equity (finance) In finance, equity is ownership of assets that may have debts or other liabilities attached to them. Equity is measured for accounting purposes by subtracting liabilities from the value of the assets. For example, if someone owns a car worth $ ...
*
Share capital A corporation's share capital, commonly referred to as capital stock in the United States, is the portion of a corporation's equity that has been derived by the issue of shares in the corporation to a shareholder, usually for cash. "Share capital ...
*
Shares authorized The authorised capital of a company sometimes referred to as the authorised share capital, registered capital or nominal capital, particularly in the United States) is the maximum amount of share capital that the company is authorised by its con ...
*
Shares issued In finance and law, issued shares are the shares of a corporation which have been allocated (allotted) and are subsequently held by shareholders. The act of creating new issued shares is called ''issuance''. Allotment is simply the transfer of sha ...
*
Shares outstanding Shares outstanding are all the shares of a corporation that have been authorized, issued and purchased by investors and are held by them. They are distinguished from treasury shares, which are shares held by the corporation itself, thus represent ...
*
Treasury stock A treasury stock or reacquired stock is stock which is bought back by the issuing company, reducing the amount of outstanding stock on the open market ("open market" including insiders' holdings). Stock repurchases are used as a tax efficie ...


References

{{Authority control Stock market terminology Equity securities Corporate finance