What are common stocks?
Common stock is an equity interest in a corporation (equity means that you actually own a bit of the company). Generally, each share represents pro rata ownership of the corporation, is entitled to equal dividends with all other shares of the same class, may cast one vote per share for the election of directors or for the approval of major corporate decisions, and participates equally with other common shares in the event of liquidation of the business. Bonds and debentures, on the other hand, are evidences of loans made to a business in return for a promised rate of return (interest), and a promise to repay the principal or “face” amount of the loan at a fixed date in the future (sometimes sooner, at the option of the company).
