COMMON STOCK

I. DESCRIPTION
 Common stock represents ownership in a company and a portion of profits (dividends). This instrument is issued by companies only and can also be obtained
either in the primary market or the secondary market. Investment in this form of business translates to ownership of the business as the contract stands in
perpetuity unless sold to another investor in the secondary market. The majority of stocks trading today take this form.
II. ADVANTAGES
 Holders of common stock exercise control by electing a board of director and voting on corporate policy.
 Most stocks are very liquid; in other words, they can be bought and sold quickly at a fair price.
III. DISADVANTAGES
 Investors in a company may not know all that there is to know about the company. This limited information can sometimes cause investment decision-making to be
difficult.
 Stock prices tend to be volatile. Prices can be erratic, rising and declining quickly. Such declines often cause investors to panic and sell, which actually only serves
to lock in their losses.
 PREFERRED STOCK

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I. DESCRIPTION
 The holder of preference share owns some percentage of the company but cannot participate in anything to the company. Also holder of preference share has the
claim of the company asset and earning of the company. This instrument is issued by corporate bodies and the investors rank second (after bond holders) on the
scale of preference when a company goes under. The instrument possesses the characteristics of equity in the sense that when the authorized share capital and
paid up capital are being calculated, they are added to equity capital to arrive at the total.
II. ADVANTAGES
 Dividends must be paid on the preferred stock before they can be paid on the common stock. In a sale, liquidation or bankruptcy reorganization, the interests of
the preferred holders usually come ahead of those of the common stock holders, but behind the debt holders.
 Most, but not all, preferred stocks is cumulative, meaning if a full dividend is not paid each quarter, it accumulates indefinitely until paid.
III. DISADVANTAGES
 Preferred stocks usually carry no voting rights
 Almost all preferred stocks are callable at par/stated value at the issuer’s option, normally at a specified price after a specified time from issue date (usually five
years).