Common stocks are shares of ownership of a corporation. They allow you to own a portion of the company without taking possession. They are the type of stocks that most people are thinking of when they use the term “stock.” In other words, it is a preferred stock.
Like other securities, stocks are traded on a secondary market called the stock market. That makes them liquid as well as easy to price. As a result, they are excellent indicators of the underlying value of the assets. The other common type of security is a bond.
Quoted from thebalance.com, common stocks allow stockholders to vote on corporate issues, such as the board of directors and accepting takeover bids. Most of the time, stockholders receive one vote per share. Stockholders also receive a copy of the corporation’s annual report.
The Basics of Stock Market
Stocks are bought and sold throughout the day on a stock exchange. he two stock exchanges in the United States are the New York Stock Exchange and the NASDAQ. For this reason, the price of a share of a stock goes up and down depending on the demand.
You can make money from stocks in two ways. First, from the dividend payments or by selling it when the price of the stock goes up. You can also lose your entire investment if the stock price plummets.
Common Stock as an Asset is Questionable
Common stock is an asset for the shareholder. Like any other asset, such as a house, gold, or diamonds, the owner will receive payment when it is sold.
Common stock is listed as an asset on a corporation’s balance sheet. The amount reflected on the balance sheet is its par value. It’s an arbitrary number, often one cent per share.
The difference between the par value and the amount received under the IPO is called capital surplus. Neither figure is the stock’s market value, also known as market capitalization. That figure changes along with the stock price. It’s the stock price times the number of outstanding shares.