Common stock is the most common type of share issued by a public company.
It gives the shareholder the right to participate in the decision making with respect to electing the members of the highest management of the company. Namely, the board of directors.
Also, common stock enables its owner to participate in defining the company development course. It is done through voting too.
There are certain varieties of common stock, but what classifies it is as common is the claim to asset distribution. In this case, it will have the lowest priority. For example, if the company goes bankrupt and the people related to the business claim their money, the creditors and debtholders will have their claims fulfilled in the first place, then the preferred stockholder will come, and only after that the common stockholder.
Hence, the common stock is quite a risky investment as there is really no guarantee on the possible outcomes. Unlike in the case of preferred stock.
2020-07-23 • Updated