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stock

stock, in finance, instrument certifying to shares in the ownership of a corporation. Bonds are similar evidences of shares in a loan to a corporation. Stock yields no dividends until claims of bondholders have been met. Preferred stock is entitled to dividends of a specified percentage per annum before common stock is entitled to any dividends; the common stock is then usually entitled to the rest of the profits. In case of liquidation of the company, holders of bonds and preferred stock take precedence over holders of common stock in the division of assets. Holders of common stock usually have voting rights in the management of the corporation; bondholders and, usually, holders of preferred stock have no voting rights. Since the value of common stock depends largely on its earnings, it is often issued with no par value. Public demand for securities and the need of corporations for ready capital have led to the development of stock exchanges in most of the major cities of the world (see stock exchange).

The Columbia Electronic Encyclopedia, 6th ed. Copyright © 2012, Columbia University Press. All rights reserved.

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