Consumer Investments
Stocks: A Brief Introduction
When a business enterprise needs to raise funds, they may issue tradable shares of their assets, known as stock. Thus, in the business world, stock is a share of ownership in a company. Preferred stock is the first to pay dividends and the first to be redeemed if a company liquidates its assets. Preferred stock also works in a way like a bond, in that the dividend rate is generally fixed. Preferred stock owners do not usually have voting rights, whereas common stock ownership generally carries voting rights. In the article below all our references to "stock" will refer to common stock, unless otherwise indicated.
Common stocks are financial instruments known as equities, which are claims to share in the net income (after expenses) and the assets of a business. A share of common stock represents a fraction of ownership in the business. For example, if an investor owns one share of common stock in a company and that company has ten million shares of stock issued, then the ownership value amounts to one ten-millionth of the company's value.
