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Questions and Answers
What is a stock?
What is the main reason corporations issue stock?
What is the difference between common and preferred stock?
What is the advantage of owning a majority of shares in a company?
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What is the consequence for common stockholders if a company misses a dividend?
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Study Notes
What is a Stock?
- A stock represents ownership in a company, giving shareholders a claim on a portion of its assets and profits.
Why Corporations Issue Stock
- Corporations issue stock to raise capital for various purposes, such as expanding business operations, repaying debt, or financing new projects.
Types of Stock
Common Stock
- Represents ownership in a company and gives shareholders voting rights.
- Holders receive dividends, which are portions of the company's profit.
- In the event of liquidation, common stockholders are last in line to receive assets after creditors and preferred stockholders.
Preferred Stock
- Has a higher claim on assets and profits than common stock.
- Holders receive a fixed dividend payment and have priority over common stockholders in the event of liquidation.
- Typically, preferred stockholders do not have voting rights.
Benefits of Owning a Majority of Shares
- Gives the shareholder control over the company, allowing them to make key decisions.
Consequences of Missing a Dividend Payment
- If a company misses a dividend payment, common stockholders do not receive their expected dividend, which can negatively impact the stock's value and investor confidence.
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Description
"Unlock the World of Stocks: Test Your Knowledge with this Quiz!" Discover the ins and outs of stocks with this quiz designed to help you understand the basics. From common and preferred stocks to the role of the stock market in business, this quiz will test your knowledge and help you gain a deeper understanding of this popular form of investment. Perfect for anyone interested in learning more about the world of finance and investing.
