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Stock Market Investment: Share Holder Classifications
There are two stock market investment share holder Classifications of stock:
And as the word suggests, "Preferred" shares has certain advantages over common stock. First, preferred share holders are paid dividends on their stock market investment before common share holders. And if a company isn't doing well, the Common stock dividend is eliminated first. Second, is if a company goes out of business, the owners of preferred shares have prior claim to any assets that remain when the company is dissolved and after bond holders and other creditors have been paid. Owners of common stock are the last in line to pick up the pieces of the fallen corporation.
As owners, common share holders elect a corporation's Board Of Directors. The board of directors is a group of individuals, which are responsible for managing the affairs and growth of the corporation. The power of the board usually extends beyond that of the founder of the company. The power resides in this board because the board is in the position of representing the share holders as a group.
At worst, common share holders can lose their entire stock trading investment if their company fails. In such a case, a company may be sold or liquidated and its remaining assets distributed among creditors, such as banks and bondholders. Shareholders would receive proceeds only after theses more senior claims are satisfied. In order to make money, the individual share holder must sell his shares back to onto the market, through a Stock Exchange and their Stock Brokers.
Are you understanding the stock market clearer now? Can you start to see how the stock market works? Great!
Next: Stock Market Performance and Profits
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