Common stock

Examples of Common stock in the following topics:

• Common Stock

  • Common stock is a form of ownership and equity, different from preferred stock, that still earns rights of ownership for its shareholders.
  • Common stock is a form of corporate equity ownership, which is a type of security .
  • "Common stock" is used primarily in the United States.
  • It is called "common" to distinguish it from preferred stock.
  • Also, Common stock usually carries the right to vote on certain matters.

• Dividend Preference

  • A corporation may issue two basic classes or types of capital stock—common and preferred.
  • If a corporation issues only one class of stock, this stock is common stock.
  • Preferred stock is a class of capital stock that carries certain features or rights not carried by common stock.
  • Common stock is a form of corporate equity ownership, a type of security.
  • It is called "common" to distinguish it from preferred stock.

• Accounting for Sale of Stock

  • How the stock sale is accounted for depends on the type of stock sold.
  • Most stock sales involve common stock or preferred stock.
  • If the common stock is sold above par value the journal entry is slightly different.
  • Most stock sales involve common stock or preferred stock.
  • Summarize how to account for the sale of common stock, preferred stock and treasury stock

• Claim to Income

  • In the cases of bankruptcy and dividend distribution, preferred stock shareholders will receive assets before common stock shareholders.
  • Preferred and common stock have varying claims to income which will change from one equity issuer to another.
  • In general, common stock shareholders will not receive dividends until it is paid out to preferred shareholders.
  • This claim is senior to that of common stock, which has only a residual claim.
  • Preferred and common stock both carry rights of ownership, but represent different classes of equity ownership.

• Common and Preferred Stock

  • That being said, holders of this type of stock usually do not have voting rights, while common stock holders do.
  • Convertible preferred stock are preferred issues which holders can exchange for a predetermined number of the company's common-stock shares.
  • It is a one-way deal, and an individual cannot convert the common stock back to preferred stock, if they have already exchanged their preferred stock with the company.
  • All preferred stockholders are paid first, before common stock holders.
  • Participating preferred stockholders can "double dip", and are entitled to both their money back, as well as the leftovers for common stock, proportionate to the amount of common stock for which their preferred stock can be converted into.

• Preferred Stock

  • Preferred stock usually carries no voting rights, but may carry a dividend, have priority over common stock upon liquidation and/or have other benefits.
  • It is senior (i.e. higher ranking) to common stock, but subordinate to bonds in terms of claim (or rights to their share of the assets of the company).
  • In other words, in the case of liquidation or bankruptcy, preferred stock will have claim to assets before common stock, but after corporate bonds or other debt instruments.
  • Preferred stock usually carries no voting rights, but may carry a dividend and may have priority over common stock in the payment of dividends and upon liquidation.
  • Some examples are prior preferred stock (highest priority), preference preferred stock, convertible preferred stock (exchangeable for common stock), cumulative preferred stock, exchangeable preferred stock, participating preferred stock, putable preferred stock, monthly income preferred stock, and non-cumulative preferred stock.

• Convertible Stock

  • This type of stock has an embedded option that allows it to be converted into a specified number of shares of common stock at a predetermined price; usually at a premium over the stock's market price.
  • Preferred shares rank higher to common stock during earnings distributions, such as dividends; however, they are subordinate to bonds in terms of their claim to company assets in the event of a business liquidation.
  • Unlike common stock, preferred shares usually have no voting rights.
  • The result is divided between the value of the shares that fall under "common stock - par value" and the excess value over par is reported as "common stock - additional paid-in-capital".
  • A public company's preferred stock is designated as convertible if it can be exchanged for common stock.

• Preferred Stock Rules and Rights

  • Preferred stock usually carries no voting rights, but may carry a dividend and may have priority over common stock in the payment of dividends and upon liquidation.
  • Preferred stock is a special class of shares that may have any combination of features not possessed by common stock.
  • The following features are usually associated with preferred stock: Preference in dividends preference in assets, in the event of liquidation, convertibility to common stock, callability, and at the option of the corporation.
  • This claim is senior to that of common stock, which has only a residual claim.Almost all preferred shares have a negotiated, fixed-dividend amount.
  • Preferred stock is a security ( a little more modern that this stock from the VOC or Dutch East India Company) that carries certain rights which designate it from common stock or debt.

• Accounting for Preferred Stock

  • Preferred stock is a class of capital stock that carries certain features or rights not carried by common stock.
  • When a corporation issues both preferred and common stock, the preferred stock may be:
  • Companies must pay unpaid cumulative preferred dividends before paying any dividends on the common stock.
  • Convertible preferred stock is preferred stock that is convertible into common stock of the issuing corporation.
  • Holders of convertible preferred stock shares may exchange them, at their option, for a certain number of shares of common stock of the same corporation.

• The Cost of Preferred Stock

  • The price of a preferred stock is $100.
  • The cost of preferred stock is 13%.
  • In the event of liquidation, preferred shareholders are paid off before the common shareholder, but after debt holders.
  • Preferred stock may also be callable or convertible, meaning that the company has the option to purchase the shares from shareholders at anytime for any reason - usually for a premium - or convert the shares to common stock.
  • This is different than common stock, which has variable dividends that are never guaranteed.