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Different Stocks Traded in Market

Different Stocks Traded in Market

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Published by ClassOf1.com
There are main two types of stocks available in the market that can be traded. Common Stocks and Preferred Stocks. This document explains about these 2 types of stocks in detail.
There are main two types of stocks available in the market that can be traded. Common Stocks and Preferred Stocks. This document explains about these 2 types of stocks in detail.

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categoriesBusiness/Law
Published by: ClassOf1.com on Sep 04, 2013
Copyright:Attribution Non-commercial

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Finance
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Subject: Finance
*
The Homework solutions from Classof1 are intended to help students understand the approach to solving the problem and not forsubmitting the same in lieu of their academic submissions for grades.
 
Different Stocks Traded in Market
There are main two types of stocks available in the market that can be traded.
Common Stock 
The stocks traded in the stock market are usually the common stocks Majority of the stocks areissued by the company in this form only. Common shares basically represent the ownership that aninvestor has got in a company and the claims that they get as dividends on them as portion of theprofits that is given out. Investors also get some sort of a voting right to elect the board members which is normally one per share. These board member then oversee the major decisions that thatthe management takes.Over a period of time, the common stock would be seen to yield higher returns in comparison tosome other forms of investment. However this high return also comes at a cost, since the risk associated with this kind of an investment is usually very high as there are high chances of thecompanies going bankrupt and also filing for solvency. In this case, the common shareholders of the company would not be getting their money aback till all the other creditors, preferredshareholders and the bondholders have received their due back.
Preferred Stock 
Preferred stock usually represents some degree of ownership held in a company. This type of 
ownership however usually doesn’t entertain any sort of ownership rights whatsoever in the firm.
This can at the same time vary depend on the policy of the company. In case of a preferred share,the investors are in usual cases guaranteed a fixed type of dividend. This is the difference from thecommon stock wherein the dividends accrued with the investment are always variable. Also themajor advantage with having a preferred stock is that during the time of the liquidation of the firm,the preferred shareholders would be paid their due back before the common shareholders but stillthis will be after the debt holders have been paid off. The company also has the option of 
 
Subject: Finance
*
The Homework solutions from Classof1 are intended to help students understand the approach to solving the problem and not forsubmitting the same in lieu of their academic submissions for grades.
 
purchasing back the preferred stock at any given point of time from the shareholders. This isusually done at a premium price in comparison to the current market value.
Different Classes of Stock 
There might be the possible when the companies might issue some other classes of stocks, otherthan these two so as to keep the voting rights with them. Hence the companies tend to customizethese different classes of stocks as per their requirements. So there are cases in which the differentsets of people are given different voting rights based on the kind of stock they hold. For example incertain cases, one group of people would be given ten votes per share while the other would begiven only one vote per share depending on the type of stock that they hold.

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