Question

Identify the features of common stock?

Answer 1

Solution:

Common stock is ownership in part of a company.If you own stock in a company, you are entitled to portion of company assets, liabilities, profits and voting rights attached to that stock.

Common stock is also known as ordinary shares of the company. These stock entitles voting rights (One vote per share) to select board members who are responsible to implement management decesions. Common stock enttiles its holder to have share in company;s profits in form of dividends. In long period, common stock provides higher yield as compared to other forms of investment securities by way of capital growth. However higher returns comes at a cost, as these shares entails higher risks. In case of liquidation, these shareholder's will be paid only after making payment for creditors, bond holders and preference shareholders.