What is “Common Stock”?
Common stock is one form of securities issued by a public corporation. Essentially, the purchase of common stock provides the shareholder with a specified amount of equity ownership in the issuing company, as well as various rights and privileges connected with the operation of the corporation. Common stock is the most widely issued type of public stock, and is the stock type of choice for most initial offerings to the general public. The ownership of common stock usually comes with several privileges. Shareholders are granted the privilege to vote in at least some decisions relevant to the operation of the corporation, such as the selection of persons to serve on a board of directors. Depending on the exact regulations regarding the issuance of stock within the company’s by-laws, owing common stock may also allow investors to participate in other voting activities as well. In return for the purchase of common stock, investors also earn a dividend on their shares, based on the performa
Common stocks are the primary unit of ownership in a corporation with certain rights including voting and major issues concerning corporation. Shareholders as they are known have liability to the value of stocks. So generally common stocks are issued to the Founders, Board of directors, or employees through employee stock option program. The holders of common stock can reap two main benefits from the issuing company: capital appreciation and dividends. Capital appreciation is rise in the value of assets based on the rise in market price. For example, say you have purchased a share for Rs 10/ per share, which pays dividend of Re 1/year and now trading at Rs 15/per share a year later. Your capital appreciation will be Rs5 or 50%. Dividend as explained in earlier posts, are the payments made by the corporation to its shareholder members when it earns profit. Joint Stock Company allocates a fixed amount per share while Co-operatives allocate dividends according to the shareholders performa
