Common Stock

What is Common Stock?

Common stock represents ownership of a business.

The owners of the common stock (stockholders) are said to own the equity in the business and are entitled to a distribution of the profits. The owners control the business by appointing the board of directors who manage the business, and by voting on major issues of policy.

Common stock is seen as a more risky investment, as it has no rights to a preference for the return of capital or a dividend, and in the event of liquidation, has to wait until preferred shareholders, bond holders, other secured lenders and creditors have been paid.

The advantage of common stock is that it is entitled to a distribution of the profits of the business and generally provides a higher return on investment in the long term.

For further information see the Wikipedia common stock definition.

Learn a new bookkeeping term

Random bookkeeping terms for you to discover.

Link to this page

Click in the box and paste this common stock definition link to your site.

Return to the Dictionary

Last modified February 5th, 2014 by Team

You May Also Like