A type of security that represents ownership in a company/ corporation divided into equal shares that are a claim on its earnings (dividends) and assets (residual interest). Depending on its contractual rights, a stock may have many forms including common stock and preferred stock. Common stock entitles its holders, in addition to the claim on earnings and assets, to vote in the election of management and other matters presented for decision taking at shareholders’ meeting (voting can be in person or by proxy).
Preferred stock, by nature, does not entitle its holders to such voting rights but it has priority as to their claims on earnings and assets. In other words, preferred stock has a prior claim on dividends as compared to common stock.
