Common Stock

What does it mean?
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 bond holders, preferred shareholders, and other debt holders have been paid in full.

In Other Words...
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.

Related Links
Stock Basics Tutorial - If you're new to the stock market and want the basics, this is the tutorial for you!

Related Terms
Board of Directors | Bond | Liquidation | Preferred Stock | Stock

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