Common Stock


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.

In the U.K., these are called "ordinary shares."


Loading the player...

BREAKING DOWN 'Common Stock'

If the company goes bankrupt, the common stockholders will not receive their money until the creditors and preferred shareholders have received their respective share of the leftover assets. This makes common stock riskier than debt or preferred shares. The upside to common shares is that they usually outperform bonds and preferred shares in the long run.

  1. Preference Shares

    Company stock with dividends that are paid to shareholders before ...
  2. Assessable Capital Stock

    The capital stock of any bank or financial institution that could ...
  3. Yield Advantage

    The relationship between convertible securities and the dividend ...
  4. Preference Equity Redemption Cumulative ...

    A convertible preferred stock with an enhanced dividend that ...
  5. Discounts For Lack Of Marketability ...

    A method used to help calculate the value of closely held and ...
  6. Paired Shares

    The stock of two separate companies that are under the management ...
Related Articles
  1. Bonds & Fixed Income

    A Primer On Preferred Stocks

    Offering both income and relative security, these uncommon shares may work for you.
  2. Mutual Funds & ETFs

    Proxy Voting Gives Fund Shareholders A Say

    You have the right to take part in important company decisions - even if you cannot attend the meetings.
  3. Investing Basics

    Knowing Your Rights As A Shareholder

    We delve into common stock owners' privileges and how to be vigilant in monitoring a company.
  4. Investing

    How to Win More by Losing Less in Today’s Markets

    The further you fall, the harder it is to climb back up. It’s a universal truth that is painfully apparent in the investing world.
  5. Fundamental Analysis

    Value Investing Strategies in a Volatile Market

    Volatile markets are a scary time for uneducated investors, but value investors use volatile periods as an opportunity to buy stocks at a discount.
  6. Mutual Funds & ETFs

    Using Short ETFs to Battle a Down Market

    Instead of selling your stocks to get gains, consider a short selling strategy, specifically one that uses short ETFs that help manage the risk.
  7. Mutual Funds & ETFs

    How to Lower Investment Account Fees in Retirement

    Retired investors need all the money they have, which is why they should keep an eye on investment fees, as high fees can lower returns.
  8. Investing Basics

    Calculating Capital Gains Yield

    Capital gains yield refers to a security’s appreciation or depreciation during the time it’s held.
  9. Investing Basics

    Why Use a Discount Broker?

    A discount broker is a stockbroker that does not offer clients investment advice, but trades shares for a smaller commission than a full-service broker.
  10. Investing Basics

    How Does a Convertible Debenture Work?

    A convertible debenture is an interest-bearing loan a company issues that can be turned into stock.
  1. How do dividends affect the balance sheet?

    Dividends paid in cash affect a company's balance sheet by decreasing the company's cash account on the asset side and decreasing ... Read Full Answer >>
  2. What is the effect of a reverse split on the stock's value?

    When a company executes a reverse stock split, the stock's value increases by the multiple by which the company is reduced. ... Read Full Answer >>
  3. Are companies with high Book Value Of Equity Per Share (BVPS) takeover targets?

    Companies with high book value of equity per share (BVPS) can be good takeover targets if those companies are public and ... Read Full Answer >>
  4. What is the difference between the equity market and the stock market?

    The terms "equity market" and "stock market" are synonymous, both referring to the equity interests in publicly held companies, ... Read Full Answer >>
  5. What is the difference between Class A shares and other common shares of company's ...

    The difference between Class A shares and other common shares of a company’s stock is usually the amount of voting rights ... Read Full Answer >>
  6. Is par value or market value more important to stockholder equity?

    Stockholders' equity is often referred to as the book value of a company. The market value of a company's stock is not influenced ... Read Full Answer >>
  7. How do fixed assets become impaired?

    Marginal analysis can be used as a reliable procedure for calculating marginal rates of return between different investment ... Read Full Answer >>
  8. How can you calculate Book Value Of Equity Per Share (BVPS) in Excel?

    The book value of equity per share (BVPS) measures a stock's valuation that allows investors to assess the financial health ... Read Full Answer >>
  9. Do stock splits and stock dividends affect stockholder equity?

    Stockholders' equity represents the capital portion of a company's balance sheet. The stockholders' equity can be calculated ... Read Full Answer >>
  10. Why should a company buy back shares it feels are undervalued instead of redeeming ...

    Repurchase and redemption are associated with different classes of stock. Common shares can be bought back by the issuing ... Read Full Answer >>
  11. What are the types of share capital?

    Share capital refers to the funds a company receives from selling ownership shares to the public. A company that issues 1, ... Read Full Answer >>
  12. Can anyone own common stock in a company?

    Any investor on the stock market can purchase common stock. However, in some ways common stock owners have fewer rights than ... Read Full Answer >>
  13. How do you transfer common stock from one broker to another?

    Common stock shares are most commonly transferred from one broker to another by a system known as the Automated Customer ... Read Full Answer >>
  14. Do common stock owners have any protections against bankruptcy or fraud?

    There are two types of bankruptcy or fraud that may affect common stock owners. The first is a bankruptcy or fraud by the ... Read Full Answer >>
  15. Does common stock offer the best investment vehicle in a company or sector?

    The best investment vehicle depends on an individual investor's risk tolerance, time horizon and goals. Common stock is paradoxical, ... Read Full Answer >>
  16. What is common stock and preferred stock?

    Issuers of equity instruments are free to structure the rights associated with different classes of stock in pretty much ... Read Full Answer >>
  17. What are the pros and cons of owning preferred stock instead of common stock?

    There are a number of advantages and disadvantages to owning preferred stock over common stock shares. A common stock is ... Read Full Answer >>
  18. What are the differences between dilutive securities and antidilutive securities?

    Publicly traded companies can offer either dilutive or antidilutive securities. These terms commonly refer to the potential ... Read Full Answer >>
  19. 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 ... Read Full Answer >>
  20. Why would a company have multiple share classes, and what are super voting shares?

    Firstly, do not confuse different classes of common stock with preferred stock. Preferred shares are an entirely different ... Read Full Answer >>
  21. Does issuing preferred shares offer a tax advantage for corporations?

    There is no direct tax advantage to the issuing of preferred shares when compared to other forms of financing such as common ... Read Full Answer >>
  22. Can preferred stocks be traded like common stocks? Are their prices the same?

    First, let's look at the differences and similarities between common stocks and preferred stocks. Both represent a piece ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  2. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  3. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  4. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  5. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
  6. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!