Zulfiqar Hasan

Common stock is a type of stock which represents ownership in a corporation. Securities representing equity ownership in a corporation, providing voting rights, and entitling the holder to a share of the company's success through dividends and/or capital appreciation is called common stock.

Preferred stock is a special form of stock having a fixed periodic dividend that must be paid prior to payment of any common stock dividends. Preferred stock, is a hybrid form of financing, sharing some features with debt and some with common equity.

Common Shareholders' Rights and Privileges

1. Ownership in a Portion of the Company

2. The Right to Transfer (sell) Ownership

3. The right to receive dividend payments

4. The power to buy the share / Preemptive Right

5. The right to vote to elect directors

6. Residual ownership

7. Residual claim on income and assets

8. The right to receive a proportionate distribution of assets on corporate liquidation

9. Limited Liability

10. No maturity date

11. Can attend at annual general meeting

Characteristics of Preferred Stock

1. Dividends: Owners of preferred stock receive payment of dividends before the owners of common stock.

2. Fixed dividend payment (similar to bond interest payment)

3. Convertibility: Often, preferred stock can be changed or converted into common stock.

4. Callability: Company can contact the owners of preferred stock and force them to sell it back to the company for either cash or common stock.

5. Bankruptcy: Priority to take…

6. Less Volatility: Preferred stock generally does not move up or down as fast as common stock. This means it is less volatile.

7. No maturity date

8. Do Not Have Voting Rights: Preferred stockholders do not have voting rights (like common stockholders do)