WHAT IS “CAPITAL STOCK”?
Capital stock has to do with all the shares of stock that represent the ownership of a given company. The exact number of shares that can be issued in the way of capital stock is normally recorded in the current balance sheet for a company. Capital stock will involve all types or classes of stock that the company is authorized to issue. The basis for issuing capital stock is normally outlined in the charter of the corporation. Often, the charter will specify not only the number of shares that can be included as part of the issuance, but also define the class or classes of stock that the corporation will release for issue. It is not unusual for a company to issue both common stock along with preferred stock as part of the overall strategy. The common stock may be provided to hourly employees of the company as part of the benefit package, while the preferred stock is open for issue to any outside investor. Generally, capital stock is issued at a nominal value, but may increase in value o
Capital stock is simply the ordinary shares of stock companies issue to raise money. Large companies may divide their capital stock into various “classes.” When that happens, each “class” of shares will gain certain rights that distinguish them from other classes. The two most common classes of capital stock are common stock and preferred stock. But there may also be non-voting stock, employee stock, and ordinary stock. If a stock certificate is specifically labeled capital stock, and it lacks common or preferred designations, then it is generally implied that there is only one class of stock. In those cases, capital stock is synonymous with ordinary common stock. Carefully read common and preferred stock certificates and you will find that many contain the word “capital.” In fact, the earlier types of the certificates were often labeled “common capital stock” or “preferred capital stock.” This is indication that common and preferred shares are really classes of capital stock. (Remembe
