Common shares as known as common stock, is ownership in a company, just the basic stock that is used to trading. Companies sell common shares through public offerings, and it trades among investors on the secondary market. The person who was holding the stock were hope to earn dividends from their share of company profits.
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However, many profitable companies do not pay dividends, and never have any intentions.(Chris Stallman, 2010) The capitalÂ stockÂ of a business entity represents the original capital paid into orÂ invested in the business by its founders. It’s aÂ securityÂ for creditors since it cannot be withdrawn to the detriment of the creditors.(Wikipedia, June 2009) For example, purchase of Genting shares means ownership of the company. Common share investments are the simplest form of investment instrument. Shares are offered at a price per share agreed upon by the company and investors. Investors receive shares with the same voting rights and the same terms as founders and employees holding stock options. Common share investments offer lower legal costs, which appeals to founders/management, friends and family, and angel investors, particularly when the size of the financing round is small. However, they may not appeal to outside investors seeking better upside potential on cash invested in a business. Some investors believe that having all shareholders on an equal footing creates incentive for the company’s team to perform better. Therefore, this benefit outweighs the benefits of preferred share deals that offer investors better upside potential and protection for downside risk. However, these groups are the exception rather than the rule. The obvious risk with common shares is that the price may fall but some other are different like investment vehicles, investors cannot lose more than their initial investment. The holders of common shares can reap two main benefits, capital appreciation and dividends. Capital appreciation occurs when a stock’s value increases over the amount initially paid for it. The stockholder makes a profit by selling the stock at its current market value after capital appreciation. Dividends, which are taxable payments, are paid to a company’s shareholders from retained or current earnings. Typically, dividends are paid to stockholders on a quarterly basis. Payments are usually made in the form of cash, but other property or stock can also be used. Payment of dividends, however, hinges on a company’s capacity to grow or maintain current or retained earnings. This means ongoing payment of dividends cannot be guaranteed. Common stock has the additional benefit of enabling its holders to vote on company issues and when choosing the company’s leadership. Usually, one share of common stock equals one vote. Common stock makes its holders part-owners of the issuing company. They have the right to know how their company is running and who runs it. The company sends them annual financial reports and sometimes minutes of the board of directors’
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