Business, Legal & Accounting Glossary
Common stock is a security representing a legal claim to a percentage of a company’s earnings and assets. Holders of common stock have some input into choosing company management, but do not generally have much say in the day to day operations. If the common stock is publicly traded, the company will generally be required to meet regulatory obligations such as filing audited financial reports. Holders of common stock are also offered the chance to participate in an annual meeting, where the company may share its vision for the future. Investors may purchase a common stock if they believe a company will be worth more in the future than it is valued at in the present. Common stock does not always pay a dividend. If the company goes bankrupt, common stockholders generally lose their entire investment.
n. stock in a corporation in which dividends (payouts) are calculated upon a percentage of net profits, with distribution determined by the board of directors. Usually holders of common stock have voting rights. These are distinguished from preferred stock in which the profits are a predetermined percentage and are paid before the common shareholders who gamble on higher profits, and collectively have voting control of the corporation.
Common Stock is a term that is used to define the ownership of an individual on part of a company.
It is also referred to as corporate equity ownership which is a type of security.
Common Stock differs from preferred stock. If a company has common stock and preferred stock then the common stock would come after preferred stock when it comes to dividend payout. Only once preferred stocks are completely paid dividends then common stock would be considered. In case a company declares insolvency or bankruptcy then common stockholders would be considered last when it comes to liquidating the assets common stockholders comes after creditors, employees, bondholders and preferred stockholders.
Common Stockholders hold the right to know the profit and loss accounts of a company and also have voting rights when it comes to crucial decisions such as choosing the board of directors. A company can have voting and non-voting Common Stock. Common Stock Holders do have a right over the company decisions. They have a right to vote on any stock split programs, stating corporate objectives and company policies. Also, some have preemptive privileges, which allow them to keep their proportionate ownership in a corporation ought it to issue additional stock offering. There is no guarantee on the dividend to be paid to the common stockholders. The returns to such common stockholders are not fixed and depend on many factors like company performance, reinvestment and also on the market value.
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This glossary post was last updated: 27th April, 2020 | 7 Views.