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  • What is common stock?

    Common stock is the most basic form of ownership in a company. For example, when you buy a share of Apple stock in your E-Trade or Robinhood account, you are buying common stock. Common stock provides ownership in the common, as well as voting rights. However, the main drawback of common stock is that in the case of bankruptcy or liquidation, common shareholders are the last to get paid. Common shareholders would be paid after preferred shareholders, bond holders, and any lendors. Lastly, common shareholders are not guaranteed a dividend. Common shareholders only receive a dividend if the Board of Directors authorizes and declares a dividend. The dividend per share will likely fluctuate based on the company’s current year financial performance.

  • What is the difference between common and preferred stock?

    The main difference is that common stockholders have voting rights while preferred stockholders do not. However, preferred stockholders are guaranteed rights to a share in the profits through a dividend. Additionally, preferred stockholders have liquidation preference, which means they get their money back before any common shareholders if the company’s assets are liquidated.