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What Is The Common Stock

The document is a homework assignment for a finance course that discusses common stock. It begins by defining common stock as securities that represent ownership in a corporation and provide shareholders voting rights and control of the board of directors. However, common stockholders have the lowest priority for ownership and are paid out last in the event of liquidation or bankruptcy. The document then lists the main types of common stock classifications, including cyclical, defensive, growth, income, and speculative stocks. It concludes by providing references used for the assignment.

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Nada Al-Mohimeed
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© Attribution Non-Commercial (BY-NC)
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Download as DOCX, PDF, TXT or read online on Scribd
22 views

What Is The Common Stock

The document is a homework assignment for a finance course that discusses common stock. It begins by defining common stock as securities that represent ownership in a corporation and provide shareholders voting rights and control of the board of directors. However, common stockholders have the lowest priority for ownership and are paid out last in the event of liquidation or bankruptcy. The document then lists the main types of common stock classifications, including cyclical, defensive, growth, income, and speculative stocks. It concludes by providing references used for the assignment.

Uploaded by

Nada Al-Mohimeed
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Fin 450

Assignment #1

By : Nada Al-Mohimed ID : 208 1463

Fin450

HW

What is the Common Stock ? A security that represents ownership in a corporation. Holders of common stock exercise control by electing a board of directors and voting on corporate policy. Common stockholders are on the bottom of the priority ladder for ownership structure. In the event of liquidation, common shareholders have rights to a company's assets only after bondholders, preferred shareholders and other debt holders have been paid in full. In addition if the company goes bankrupt, the common stockholders will not receive their money until the creditors and preferred shareholders have received their respective share of the leftover assets. This makes common stock riskier than debt or preferred shares. The upside to common shares is that they usually outperform bonds and preferred shares in the long run.

Main types of common stock classifications : y y y y Cyclical Stock: These are stocks that are sensitive to business cycles and closely connected to changing economic conditions. Defensive Stock: Stocks in this category refer to companies that manufacture products consumers need regardless of economic. Growth Stock: Stocks of growth companies are considered to hold tremendous potential for capital appreciation. Income Stock: Although income stocks can possess the characteristics of growth, however, in most cases, the heady periods of expansion by companies in this category have slowed. Speculative:. This category consists of a wide range of companies each with a unique set of circumstances and characteristics including risky, new ventures and even wellestablished companies that have fallen into distress and for various reasons are experiencing tremendous financial and business difficulties. Value Stock: Stocks deemed as "value" stocks are generally those that are currently out of favor. They usually trade at lower prices in relation to their price-to-earnings or price-to-book value. Analysts will utilize a variety of "valuation" techniques to study the stock's fundamentals.

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Fin450

HW

References : o o http://www.bellaonline.com/articles/art47325.asp http://www.investopedia.com/terms/c/commonstock.asp

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