Stocks
Stocks (or shares) are certificates that represent part of ownership of a company. They are issued in non-documentary form and for indefinite term. They can be subdivided into common and preferred stocks.
Stockholder is an owner of the company. The more stocks you possess the more influence on decisions in the company you have, and the more dividends you receive.
Common (ordinary) stock is a stock that entitles its owner to receive income (dividends that depends on profit), to influence a company’s management by voting, to receive money from selling company’s assets in proportion to stocks you have if the company goes into liquidation.
Preferred (preference) stock also entitles its owner to receive income (fixed dividend), to receive money from selling company’s assets if the company goes into liquidation, but it doesn’t carry no voting privilege.
Dividend is income received by shareholders. If the company makes profit it pays a dividend to the owners. Part of company’s profit may be retained, it cause the value of stocks to rise.
If the company goes bankrupt if has to sell its assets and repay creditors and stockholders.
Stocks are more profitable and risky than bonds. Dividend income is determined by profit of the company where as interest income is guaranteed.
