Stock – Coursework Example
Stock al Affiliation Stock Common stock describes ultimate ownership (and risk) of a property or position in a corporation. In the event of liquidation, these stockholders possess a residual claim on the assets limited to the amount recovered from the assets of the company. Preferred stock, on the other hand, is a form of hybrid financing with a greater claim to ownership of the company. Ideally, when a company is undergoing liquidation, and paying all its debtors, preferred stockholders receive their money before common stockholders. Additionally, dividends of preferred stocks are greater than those of common stock (Gimenez, 2015). I would recommend preferred stocks due to its advantageous features. When one buys a preferred stock, he or she can predict the payment t of his dividends well since they are paid at regular intervals. For common stock, however, the board of directors decides whether to pay a dividend or not.
A publicly held company defines a company whose ownership is distributed among members of the public by means of stock sharing that is shareholders claim part of its assets and profits. A privately held company is one whose ownership rests solely on its founders or a group of private investors. Identification of the two companies rests on public disclosure. Publicly held companies are required to present quarterly earnings reports and other reports with the Securities and Exchange Commission (SEC) and to share this with shareholders and the public. Private companies do not necessarily trade stock on the stock exchange and hence do not disclose their financial information to anyone (Gimenez, 2015).
Classified stock is a type of stock in a publicly owned company that offers or issues more than one type of stock with each having distinct rights attached to it. When a small privately held company goes public, it might designate some outstanding stock as founders’ shares so that the founders retain some privileges that come with the latter. These might be in respect to voting privileges, security, and their participation in profits.
Giménez, R. J. C. (2015). The Stock Market as an Alternative to Banks for the Financing of New Business Projects: Business Angels. In New Challenges in Entrepreneurship and Finance (pp. 129-139). Springer International Publishing.