Common Stock

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Wikis > Common Stock

Definition

Common stock, also known as Ordinary Shares, is a type of corporate equity ownership that is contingent on earnings and is better known for its voting rights. Holders of common stock hold voting rights on influential factors within a company such as the election of the board of directors and company. Although common shareholders hold this voting influence, they hold lesser claim to company [[Dividend dividend payouts in comparison to preferred stock. Value with common stock tends to fluctuate more than other stocks and is thus considered to be a higher risk choice.

Benefits

Common Shares tend to receive higher benefits due to their higher risk factor. Unlike a preferred stock, which guarantees fixed payments to shareholders, dividends paid to common shareholders are based solely on company earnings – thus, if a company does extremely well, common stock holders will receive higher dividends than their preferred counterparts.

Risks

Should a company declare bankruptcy, common shareholders are the last to receive their funds behind preferred stock holders and other creditors.