The stock or the capital stock is a type of business entity which represents the unique capital invested or paid into in the business by the founders. The stocks serve as the security for the creditors of any business as it cannot be withdrawn to the detriment of creditors. The term stock is quite different from the assets and the property of any business that can fluctuate in value and quantity.
What are the shares?
The stock of any business is parted into several shares; the total number of these shares should be described at the formation time of the business. Offered the entire amount of money in any business, a share has some stated face value, which is commonly known as the par value of any share. The per value is the least amount of money which a business can sell and issue as well as it is the value which is represented as capital in accounting of any business. In some jurisdictions, the shares are not at all related with the per value. This type of stock is also known as non-par stock. The shares symbolize a fraction of ownership in any business and a business can offer various types of shares and each of the shares can have different type of privileges, ownership rules or share values.
Ownership of the shares is filed by the issuance of any stock certificate. The stock certificate is a legal document which identifies the amount of the shares which is owned by a shareholder and the other specifics of the shares like the class or the per value of the shares.
What are the types of stocks?
Commonly the stock takes the outline of the shares of either preferred stock or common stock. As the unit of ownership, the common stock generally carries the voting rights which can be exercised in the corporate decisions. On the other hand, the preferred stock completely differs from the common stock. Generally, it does not carry any voting right but this type of stock is entitled legally to get a particular level of dividend payments before issuing any dividend to the other shareholders.
The convertible preferred stock which contains a choice for any holder to alter the preferred shares into some permanent number of the common shares, commonly anytime after the pre-decided date. The shares of this type of stock are known as the “Convertible Preferred Shares”.
The preferred stock can be hybrid by having all the qualities of the bond of the common stock voting rights and fixed returns. Both of these stocks also have preference in payment of the dividends over the common stock and these shares are also offer preferences at the liquidation time.
For assistance with your Finance Homework Help you can visit classof1.com
Find More Finance Articles