Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing to invest in company's net assets, can purchase for cash or exchange with other types of instruments traded on stock exchange.
There are commonly two types of stocks; common and preferred stocks.
Common stock is, well, common. At the point when individuals discuss stocks, they are in all probability talking about this type. Mostly, the greater part of stocks issued is in this shape. We essentially went over highlights of basic share in the net assets of the company. These stocks may pay annual dividends but the companies do not promise the return every year. investors get one vote for each offer to choose the board individuals, who regulate the significant choices made by administration of the company.
Preferred stocks are a type of stocks a type the holders of which has a preferential right to receive preferred dividend every year before the common stock holders are paid any returns. The main difference is that they have a preferred right over returns before distribution to common stockholders and that the dividend is usually promised unlike common stock dividends.
Common and preferred are the two main forms of stock; however, it's also possible for companies to customize different classes of stock in any way they want. The most common reason for this is the company wanting the voting power to remain with a certain group; hence, different classes of shares are given different voting rights. For example, one class of shares would be held by a select group who are given ten votes per share while a second class would be issued to the majority of investors who are given one vote per share.
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