I.

Common stock
Common stocks, also known as common shares or equities, are units of ownership in a publicly
traded company.
When an individual buys common stocks, they become a part-owner of the company and have a
claim on a portion of its assets and earnings. Common stocks are the most widely known and
traded type of stock and typically offer the potential for long-term growth and dividend income.
The price of common stocks fluctuates based on market demand and supply, and investors can buy
and sell them on a stock exchange through a stockbroker or online trading platform.
Companies issue common stocks to raise capital to fund their growth and expansion plans. As a
shareholder, an individual has the right to vote in the company's annual meetings, participate in
major decisions affecting the company's future, and receive a portion of the profits through
dividends

Features of Common Stocks

1. Ownership: When an investor purchases common stocks, they become a part-owner of the
company and have a claim on a portion of its assets and earnings.
2. Dividend Income: Companies may distribute a portion of their profits to their shareholders in
the form of dividends. Dividends are typically paid out quarterly, although the company's board of
directors may choose to increase or decrease the amount paid based on their financial
performance.
3. Voting Rights: As a shareholder, an individual has the right to vote on important company
decisions, such as electing the board of directors or approving significant business transactions.
4. Volatility: Common stocks are subject to market volatility, meaning their prices can fluctuate
significantly based on market demand and supply.
5. Capital Appreciation: Common stocks offer the potential for long-term growth and capital
appreciation, meaning that an investor may be able to sell their shares for more than they
purchased them for.
6. Limited Liability: In most cases, an individual's liability is limited to the amount they invested
in the company's common stocks, meaning they are not personally liable for the company's debts
or obligations.
7. Liquidity: Common stocks can be bought and sold on a stock exchange, making them a
relatively liquid investment. However, it's important to note that fees and commissions may be
associated with buying and selling stocks.

II. Preferred Stock

Preferred shares (also known as preferred stock or preference shares) are securities that represent
ownership in a corporation, and that have a priority claim over common shares on the company’s
assets and earnings. The shares are more senior than common stock but are more junior relative to
bonds in terms of claim on assets. Holders of preferred stock are also prioritized over holders of
common stock in dividend payments.

Featues of Preferred Stocks

1. Preference in assets upon liquidation: The shares provide their holders with priority over
common stock holders to claim the company’s assets upon liquidation.
2. Dividend payments: The shares provide dividend payments to shareholders. The payments can
be fixed or floating, based on an interest rate benchmark such as LIBOR.
3. Preference in dividends: Preferred shareholders have a priority in dividend payments over the
holders of the common stock.
4. Non-voting: Generally, the shares do not assign voting rights to their holders. However, some
preferred shares allow its holders to vote on extraordinary events.
5. Convertibility to common stock: Preferred shares may be converted to a predetermined
number of common shares. Some preferred shares specify the date at which the shares can be
converted, while others require approval from the board of directors for the conversion.
6. Callability: The shares can be repurchased by the issuer at specified dates.