Investing in Common Stocks for Beginners-Part 2
Basically there are two types of stocks: common stocks and preference stocks. In this topic we will focus on the features and rights associated with holding common stocks.
Following are the five most important features associated with common stocks:
(1) Limited Liability
(2) Liquidation Rights
(3) Preemptive Rights
(4) Voting Rights
(5) Dividend Payments
Here, in Part 2, we will look at the other three important features as follows:
If a company plans to issue new stocks, existing stockholders have the rights to subscribe to new stocks, often at lower prices, before they are issued to the public.
Common stockholders have the rights to vote in general meeting of the company. Each stock carries the right to one vote. Stockholders can exercise control by electing the board members, who will oversee the major decisions and policies implemented by the management.
Common stockholders are entitled to a share of the profits in the form of dividend. However the amount of dividend payments is not based on a fixed percentage rate, it is recommended and decided by the board of directors.
Please visit the relevant guide to learn more interesting stuff about stock market basics and investment tips.
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ABOUT THE AUTHOR
The author, Loke Yuen Wong, holds an MBA from Heriot-Watt University (UK) and a BCom degree from The University of Adelaide (Australia).