Stock shares are fragments of the total value of a company. Each share represents
a degree of ownership on a business by the holder. Stocks are a direct reflection
of the performance or potential of a company, in other words its like a corporate
report card graded by investors in the market from which it derives its value
from. For businesses, it is one of the many ways they could raise cash without
the burden of debt.
Types of stocks Common stocks
as the name implies are ordinary types of shares that is widely available. When
talking about buying stocks of a company it is usually common stocks that are
being traded. Each share of a common stock represents a single vote for matters
concerning the company. In the event of company liquidation, common stock holders
are at the end of the line to receive payments over preferred stock holders
and creditors. Preferred Stocks
represents a higher degree of ownership over common share holders. Holders of
preferred shares receive fixed dividends and are paid with assets before common
stock holders in an event of a liquidation. Voting rights on this type of stock
depends on the company if they would give the option to its holders, but once
it does, preferred stocks have greater voting rights over common share holders.
Companies have the option to redeem outstanding shares of its preferred stocks
from its share holders at a higher price. Preferred shares can be converted
to common shares.
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