Question

Name three different types of stock and identify the benefits of holding ownership in them; what are hallmarks that define a share of stock according to the court in United Housing Foundation v. Forman?

Answer 1

1. Common Stock:- Common stock is common. The majority of stock issued is in this form.Common shares are the one that represent ownership in a company and a claim (dividends) on a portion of profits. Investors get one vote (per share) to elect the board members, who oversee the important and major decisions made by management. Common stock means of capital growth, yields higher returns than almost every other investment. This higher return comes as these entail the most risk. At the time of  liquidates, the common shareholders will not be receiving any money until the creditors, bondholders, and preferred shareholders are paid.
2. Preferred stock:- Preferred stock represents less degree of ownership in a company but usually it doesn't come with the same voting rights.The investors are usually guaranteed a fixed dividend forever. Some people prefer these stocks to be more like debt than equity.
3. Different Classes of Stock:- It's possible for companies to customize different classes of stock in any way they want. Different classes of shares gives different voting rights. For example, one class of shares held by a select group who are given ten votes (per share) while a second class issued to the majority of investors who are given one vote (per share).

Advantages of Common Stock:-

• Equity ownership provides the high rate of return in the long run.
• Common stocks have provided over a 6% real rate of return in the long run, which is best in inflation period..
• Common stock provides benefits to the shareholder, issuer and society in general.
• The issuer raises the capital for producing goods or services.
• The shareholder receives the benefits of an enterprise that is much higher than they would normally be able to participate in.
• Society enjoys the benefits of the services and goods of the issuing company as well as the jobs produced by the company.
• The taxes is paid by both the company and shareholders.

Advantages of preferred stocks:-

• Preferred stocks are a hybrid type of security that includes properties of both bonds and common stocks.
• One advantage of preferred stocks is regular dividends than the same company's common stock.
• Preferred stock comes with a stated dividend.
• Both bonds and preferred stocks are fixed income securities.
• Preferred shareholders own only a piece of the company.
• The value of the preferred stock can appreciate interest rate movements.

Advantages of different class of stock:-

• Investors get more voting rights per share that investors who own other classes of shares.
• It gives them the chance of controlling the business as they hold more voting rights than any other investor.
• Investors who own A share get priority over others when the company distributes dividends to its shareholders.
• Dividends of a company are distributed to investors according to the category they come under.
• Investors in such shares are given first preference, and dividends are paid to them first.
• Investing in these shares provides the investor with a dividend priority.
• In the case of bankruptcy or business failure, the investors who had initially invested in the company need to be paid back.

Hallmark for stock:- $3.02