Question

What do we mean when we say that stockholders have limited liability? How does affect the desirability of stocks as a financial asset?

Answer 1

We mean that the liability of stockholders are limited to the amount of money unpaid on the shares bought by them in case the corporation goes for bankruptcy that is the personal assets of shareholders will be liable to the extent only to the amount unpaid on shares and in case shares are fully paid up the stockholders have no other liability and they cannot be called up for payment in case the corporation files for bankruptcy.

This makes the stocks highly desirable as the stockholders can buy shares of companies without being worried about their personal assets being used for payment of liability of company.