Basic Understanding of Stock (2017 Update)

Understand Stocks

Basic Understanding of Stock


What is Stock?

A stock (or capital stocks) is a kind of security that indicates rights in a corporation and signifies a claim on behalf of assets and earnings of the corporation.

The stock is categorized into two parts:

  1. Common Stock
  2. Preferred Stock

What is Common Stock?

Common stocks commonly gives the right to owner to cast a vote at meetings of shareholders and to get dividends.


What is Preferred Stock?

Preferred stocks doesn’t have the rights to vote but have a greater claim on earnings and assets as compared to common stocks.


Common Stock Vs Preferred stock

A big advantage of Preferred stocks over Common stocks is that the Preferred stocks will get the dividends prior to common shareholders. In addition, Preferred stocks also have precedence in the event of company’s bankruptcy and shut down.


What is a Stock Corporation?

A stock corporation is corporation for profits and contains shareholders. Out of which every stockholder gets a fraction of the ownership of corporation through stock’s shares.

These shares may be given a return on their asset in the form of dividends. Shareholders are to elect directors or to vote on corporate policy matters at the annual meeting or other meetings of the corporation.


How Stocks are divided?

The stocks of any corporation is divided into shares. The sum of which are stated when the business is formed. Further shares may later be authorize by the current shareholders and issued by the corporation. In few jurisdictions, every stock share contains specific declared par value which is an official accounting value used to define the right of the corporation on the balance sheet. While in other jurisdictions, shares of stocks may be given without associated par value.


What are Shares?

Shares show a portion of ownership in a particular business. The types of shares depend on business with each having different share values, privileges or ownership rules. Ownership of shares may be issued through a stock certificate. Stock certificate is an officially authorized document that gives information about number of shares owned by a shareholder and further gives details about shares like class of shares or the par value, if any.


Who are Shareholders?

An owner of share(s) in any corporation is known as a shareholder. As the shareholders are owner of the company so they get the benefit on company’s success in the form of better stock valuation.

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