In finance, the subscribed capital of a corporation or limited-liability company, usually divided into shares and represented by transferable certificates. Many companies have only one class of stock, called common stock. Common stock, as a share of ownership in the company, entitles the holder to an interest in the company's earnings and assets. It carries voting rights that enable the holder to participate in the running of the company (unless such rights are specifically withheld, as in special classes of nonvoting shares). Dividends paid on common stock are often unstable because they vary with earnings; they are also usually less than earnings, the difference being used by the management to expand the firm. To appeal to investors who want to be sure of receiving dividends regularly, some companies issue preferred stock, which has a prior claim to dividends paid by the company and, in most cases, to the company's assets in case of its dissolution. Preferred-stock dividends are usually set at a fixed annual rate that must be paid before dividends are distributed to common stockholders. See also security, stock exchange.
This entry comes from Encyclopædia Britannica Concise.
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