Anda di halaman 1dari 5

Stock Definition (1):

Capital stock (or simply stock) of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors. Stock is different from the property and the assets of a business which may fluctuate in quantity and value.


Definition (2):
An instrument that signifies an ownership position (called equity) in a corporation, and represents a claim on its proportional share in the corporation's assets and profits. Ownership in the company is determined by the number of shares a person owns divided by the total number of shares outstanding. For example, if a company has 1000 shares of stock outstanding and a person owns 50 of them, then he/she owns 5% of the company. Most stock also provides voting rights, which give shareholders a proportional vote in certain corporate decisions. Only a certain type of company called a corporation has stock; other types of companies such as sole proprietorships and limited partnerships do not issue stock. also called equity or equity securities or corporate stock.

Definition (3):
A stock (also known as an equity or a share) is a portion of the ownership of a corporation. A share in a corporation gives the owner of the stock a stake in the company and its profits. If a corporation has issued 100 stocks in total, then each stock represents a 1% ownership in the company.

Types of stock
Stock typically takes the form of shares of either common stock or preferred stock. As a unit of ownership, common stock typically carries voting rights that can be exercised in corporate decisions. Preferred stock differs from common stock in that it typically does not carry voting rights but is legally entitled to receive a certain level of dividend payments before any dividends can be issued to other shareholders.[4][5] Convertible preferred stock is preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually anytime after a

predetermined date. Shares of such stock are called "convertible preferred shares" (or "convertible preference shares" in the UK)

New equity issues may have specific legal clauses attached that differentiate them from previous issues of the issuer. Some shares of common stock may be issued without the typical voting rights, for instance, or some shares may have special rights unique to them and issued only to certain parties. Often, new issues that have not been registered with a securities governing body may be restricted from resale for certain periods of time. Preferred stock may be hybrid by having the qualities of bonds of fixed returns and common stock voting rights. They also have preference in the payment of dividends over common stock and also have been given preference at the time of liquidation over common stock. They have other features of accumulation in dividend.

Definition of 'Preferred Stock'

A class of ownership in a corporation that has a higher claim on the assets and earnings than common stock. Preferred stock generally has a dividend that must be paid out before dividends to common stockholders and the shares usually do not have voting rights. The precise details as to the structure of preferred stock is specific to each corporation. However, the best way to think of preferred stock is as a financial instrument that has characteristics of both debt (fixed dividends) and equity (potential appreciation). Also known as "preferred shares".

Definition of 'Common Stock'

A security that represents ownership in a corporation. Holders of common stock exercise control by electing a board of directors and voting on corporate policy. Common stockholders are on the bottom of the priority ladder for ownership structure. In the event of liquidation, common shareholders have rights to a company's assets only after bondholders, preferred shareholders and other debtholders have been paid in full.

What is the difference between preferred stock and common stock?

Preferred and common stocks are different in two key aspects. First, preferred stockholders have a greater claim to a company's assets and earnings. This is true during the good times when the company has excess cash and decides to distribute money in the form of dividends to its investors. In these instances when distributions are made, preferred stockholders must be paid before common stockholders. However, this claim is most important during times of insolvency when common stockholders are last in line for the company's assets. This means that when the company must liquidate and pay all creditors and bondholders, common stockholders will not receive any money until after the preferred shareholders are paid out.

Second, the dividends of preferred stocks are different from and generally greater than those of common stock. When you buy a preferred stock, you will have an idea of when to expect a dividend because they are paid at regular intervals. This is not necessarily the case for common stock, as the company's board of directors will decide whether or not to pay out a dividend. Because of this characteristic, preferred stock typically don't fluctuate as often as a company's common stock and can sometimes be classified as a fixed-income security. Adding to this fixed-income personality is the fact that the dividends are typically guaranteed, meaning that if the company does miss one, it will be required to pay it before any future dividends are paid on either stock. To sum up: a good way to think of a preferred stock is as a security with characteristics somewhere in-between a bond and a common stock.

Bond vs. Stock

Stocks and bonds are financial instruments for investors to obtain a return and for companies to raise capital. Put very simply, stocks offer an ownership stake in the company and bonds are akin to loans made to the company. Stocks of a company are offered at the time of an IPO (Initial Public Offering) or later equity sales. The company offers investors an ownership stake by selling stocks. Stocks can be either common stock or preferred stock. Preferred stock is further divided into participating and non-participating preferred stock. With the equity that stocks offer comes greater risk. The value of stocks corresponds to the value of the company and therefore, stock price fluctuates depending upon how the market values the company. In contrast, bonds are loans offered at a fixed interest rate. When a company believes that it can raise capital cheaper by borrowing money from banks, institutional investors or individuals, they may choose to offer interest-paying corporate bonds. With bonds, an investor is promised a fixed return. While bonds are "safer" than stocks because of lower volatility, it should be noted that there is always a chance that company will be unable to repay bond-holders. In that sense, bonds are not "risk-free". However, when a company declares bankruptcy, stockholders are the first to bear losses. Creditors (including bond-holders) are next.

Comparison chart
Improve this Bond chart No. of Types: 12 Types Kinds of debt Instrument: In finance, a bond is a debt security, in which the authorized Meaning: issuer owes the holders a debt and is obliged to repay the principal and interest Bond holders are in essence Holders: lenders to the issuer Bonds markets, unlike stock or share markets, often do not have Centralization: a centralized exchange or trading system Kind: Securities Nominal yield, Current yield, Yield Analysis: Yield to maturity, Yield curve, Bond duration, Bond convexity Investors, Speculators, Participants: Institutional Investors Bonds are issued by public sectorauthorities, credit Issued By: institutions, companies and supranational institutions Owners: bondholders Bond option, Credit derivative, Credit default swap, Derivatives: Collateralized debt obligation, Collateralized mortgage obligation Stock 4 Types equity In financial markets, stock capital raised by a corporation or joint-stock company through the issuance and distribution of shares The stock holders own a part of the issuing company (have an equity stake) Stock or share markets, have a centralized exchange or trading system Securities Gordon model, Dividend yield, Income per share, Book value, Earnings yield, Beta coefficient Market maker, Floor trader, Floor broker Stock are issued by corporation or joint-stock companies stockholders/shareholders Credit derivative, Hybrid security, Options, Futures, Forwards, Swaps