Common Stock

Common Stock is a term that is used to define the ownership by individual of part of a company. It is also referred to as corporate equity ownership which is a type of security.  Common Stock is also referred as voting share or just ordinary share in many markets around the world. Common Stock is a term which is commonly used in United States markets.

Common Stock differs from preferred stock. If a company has common stock and preferred stock, then common stock would be prioritized after preferred stock when it comes to dividend payout. Only once all of the preferred stock is completely paid dividends then common stock would be considered.  In case a company declares insolvency or bankruptcy then common stock holders would be considered last when it comes to liquidating the assets common stock holders comes after creditors, employees, bondholders and preferred stock holders.

Common Stock holders 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 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 stock holders. The returns to such common stock holders is not fixed and depends on many factors like company performance, reinvestment and also on the market value.