Common Stock VS Preferred Stock

Stock is a type of security that signifies ownership in a company. And the other definition of stock is a type of security which published by company to public. If you have a stock in a company, it means that you are also as owner or stockholder a part of that company. Stock has two types : Common Stock and Preferred Stock.

Common stock is the most popular stock in capital market. Why? Because, investors who own common stock will get dividend if company get the profit. But, if the company in bad situation, investors can’t get dividend. People who have stocks in a company has the right to take a part in manage the company, accordance with the franchise that they have based on a total the stocks that they have. Common stocks are typically voting and allow holders to “vote” on issues like electing the board of directors or other issues put to a vote. This is not always the case, however, so it may be important to refer to specific features of a class of shares you are investing in.

Preferred Stockholders have a greater claim to a company’s assets and earnings. Preferred Stock often doesn’t have voting rights and don’t provide an ability to participate in the appreciation in the value of company. Preferred Stockholders typically have first access when it comes to dividends and also in a bankruptcy situation, after creditors are paid preferred stockholders will be compensated before common stockholders.