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Common Stock

Common stock represents ownership shares in a corporation, giving shareholders voting rights and a claim on a portion of the company’s assets and earnings. Common stockholders are entitled to vote on important company matters, such as electing the board of directors and approving major corporate policies. They may also receive dividends, although dividend payments are not guaranteed. Common stockholders have the potential for capital appreciation, but they are also last in line to be paid if the company goes bankrupt.

Example

If an investor buys 100 shares of common stock in Apple, they own a small portion of the company, can vote on shareholder matters, and may receive dividends.

Key points

• Common stock represents ownership in a corporation and gives shareholders voting rights.

• Shareholders may receive dividends, but payments are not guaranteed.

• In the event of liquidation, common stockholders are paid after creditors and preferred shareholders.

Quick Answers to Curious Questions

Common stockholders have voting rights and the potential to receive dividends and capital appreciation from stock price increases.

Common stockholders have voting rights but are paid last in liquidation, while preferred stockholders are paid dividends first and have priority in bankruptcy but often lack voting rights.

No, dividend payments are not guaranteed for common stockholders and depend on the company’s financial performance and dividend policy.