Understand Equity Market - Common Stocks

Common stocks (ordinary shares or equity shares) are the most common form of stocks held by the public in the market. This is a security that represents ownership in a corporation.

Facts about common stock:

1) Common stockholders have the right to control the company through their votes. They have the right to elect board of directors or to remove the directors from office.

2) There is no fixed rate of dividend on ordinary shares. Ordinary shareholders will receive dividend only if profits are available for distribution, and dividend payments are recommended and decided by the board of directors.

3) Common stockholders have limited liability. Their liability is limited to the stocks invested in the company.

4) They are the last to be paid in case of bankruptcy. In the event of a corporate liquidation, common stockholders will receive any proceeds from the liquidation of assets only after the creditors and preferred stockholders have receive their entitlements.

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