What are Common Shares?
Advantages Can’t Post Here is a brief explanation on Common Shares. Advantages of owning common shares: 1) A marketable asset 2) Potential for capital appreciation 3) Favourable tax treatment a) Dividends b) Capital gains 4) Voting – a say in the affairs of the company 5) Dividend income 6) Limited liability investment Most suitable for long-term investment (10+ years); hopefully your company doesn’t go under 😛 Problems: can be very volatile (risky) over short periods of time. Ask a Finance Question 4 Free!
Common shares are shares of stock that are understood to signify equity ownership in a corporation. Holding common shares in a company provide the investor with some basic privileges, such as limited voting rights, a return based on the profitability of the company, and possibly some benefit from appreciation in the securities associated with the company. All rights and privileges connected with the common share are encompassed with other types of shares that provide broader benefits and privileges. When it comes to voice and vote in the operation of the company, common share holders typically are granted the privilege of participating in the election process for directors. It is unusual for investors holding common shares to be allowed to nominate candidates for a vacancy among the directors, although the bylaws of some companies do extend this privilege. Investors are sometimes able to vote their total number of shares. In other situations, each investor holding common shares will be
Both public and private corporations can issue common shares. Common shareholders are the owners of a company and initially provide the equity capital to start the business. Common share ownership in a public company offers many benefits to investors. The following are some of its main advantages: • Capital appreciation • Dividends • Voting privileges • Marketability, meaning shares can easily be bought or sold There are also a few drawbacks to owning common shares. Although part owner of the business, common shareholders are in a relatively weak position, as senior creditors, bond holders and preferred shareholders all have prior claims on the earnings and assets of a company. While interest payments are guaranteed to bond holders, dividends are payable to shareholders at the discretion of the directors of a company.
Most investors only purchase with common shares, either because they are too unfamiliar with preferred shares, or they simply enjoy the greater capital gains benefit that comes with common shares. For these reasons, these investments are the most commonly traded on the world market. Investing in common stock is very simple; the majority of price information available in the form of stock quotes are all on common stock.
