Common stock, which is also called common shares or ordinary shares, refers to the category of ownership of the enterprise. Common shares generally have voting rights and better potential for appreciation of shares compared to preferred stock.
However, holders of common stock generally do not have fixed dividends and cannot receive dividends until dividends are paid out to preferred stock holders. Moreover, in case of liquidation, holders of common stock only have claim on company’s assets if claims of all creditors as well as holders of preferred stock are satisfied. Therefore, common stock is more risky than preferred stock.
Cost of common stock (rp)
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