All you want to know but never asked about the stocks and options markets.

sábado, 30 de agosto de 2014

Different types of stocks

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When a company decides to issue shares, the owners must decide what kind of stocks and in what quantities. The decision determines how profits are distributed to shareholders. The two types are preferred and common shares, but the decision goes beyond deciding the type of shares. Owners can choose to issue different classes of shares within these two types.

Common stock 

Common stock are the type that are issued more frequently. It gives the shareholder the right to one vote per share at a meeting of shareholders, and a portion of capital gains; however, the ordinary shareholders are paid after the preferred shareholders. They may or may not receive a dividend, depending on the decision of the board. This means that if the company does not receive income, the investors can not recover their investment. Also, if the company goes bankrupt, creditors and preferred shareholders will be paid before the ordinary shareholders.

Preferred Stock 

Like ordinary shareholders, owners of preferred shares are the owners of the company; and unlike the first type have they no right to vote in company decisions. Although the specific details of the preferred stock may vary between companies and share classes, preferred stockholders typically have guaranteed a fixed dividend regardless of company profitability.

Other types of stocks are the following:

  • Convertible stock: These are the stocks which have the ability to develop into bonds and vice versa, but the most common is that the bonds are converted into shares.
  • Industrial stock: These stocks establish that the contribution of shareholders to be held in the form of a service or work.
  • Pair value stock: Stocks in which confirms the numerical value of the contribution.
  • No par value stock: This type include those stocks that do not express the amount of the contribution, just set the proportion they represent in the social capital.

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