STOCKS

• A stock represents a claim on the company’s assets and earnings.
• A stock, also known as equity, is a security that represents the ownership of a fraction of a corporation.
• The ownership of a stock entitles the owner to a proportion of the corporation's assets and profits equal to how much stock they own.
• Units of stock are called "shares."
• Stocks are bought and sold predominantly on stock exchanges and are the foundation of many individual investors' portfolios.
• Stock trades must conform to government regulations to protect investors from fraudulent practices.
• Shareholders own shares issued by the corporation, and the corporation owns the assets held by a firm.
• If you own 33% of the shares of a company, it is incorrect to assert that you own one-third of that company.
• Owning stock gives you the right to vote in shareholder meetings, receive dividends if and when they are distributed, and the right to sell your shares to somebody else.
• Corporations issue at least one class of common stock in the form of shares.
• Shares of stock are a form of equity securities because they represent ownership or equity in the corporation.
• In the event of liquidation, common shareholders have rights to a company's assets only after bondholders, preferred shareholders, and other debtholders are paid in full.
• Most common stocks are assigned a par value, generally from P0.01 to P100.00.
• Some common stocks have a “no par” designation and are recorded as stated value.
• Preferred stocks are called as such because they are senior to or has preference over common stockholders as to dividends and claims on the assets of the company in the event of liquidation.
• Preferred stock does not usually carry voting rights but is still entitled to vote on certain issues affecting the company.
• Preferred stockholders are entitled to receive dividends which is set at a fixed rate based on the par value of the preferred stock.
• For instance, the holder of a preferred stock with a par value of P1,000 and a dividend rate of 10% is entitled to receive a dividend of P100 per year.
• Cumulative voting is the procedure followed when electing a company's directors.
• Each shareholder is entitled to one vote per share multiplied by the number of directors to be elected.
• Cumulative voting is advantageous for individual investors because they can apply all of their votes to one candidate.
• Statutory voting is a corporate voting procedure in which each shareholder is entitled to one vote per share and votes must be divided evenly among the candidates or issues being voted on.
• Statutory voting, sometimes known as straight voting, is one of two stockholder voting procedures and the more common option.
• In statutory voting, if you owned 50 shares and were voting on six board positions, you could cast 50 votes for each board member, for a total of 300 votes.
• You could not cast 20 votes for each of five board members and 200 for the sixth.
• Pre-emptive rights allow shareholders to maintain their ownership stake in the company by buying additional shares when new shares are issued.
• Dividends are declared out of the unrestricted retained earnings (accumulated profits) of the company and stockholders have the right to receive such dividends.
• There are three types of dividends that a corporation can declare: cash dividends, stock dividends and property dividends.
• Cash dividends are paid to stockholders in cash and are usually quoted in peso amounts or as a percentage of the par value.
• Stock dividends are declared when the company decides to conserve cash and stockholders are given additional shares of the company.
• Stock dividends are quoted as a percentage of the company’s outstanding shares.
• Property dividends are rarely declared but if done, the Board of Directors may pay out dividends in the form of assets (such as shares of another corporation owned by the company).
• The four dates to remember when dividends are declared are: Declaration Date, Ex-Dividend Date, Record Date, and Payment Date.
• Stocks are bought and sold on stock exchanges, such as the Nasdaq or the New York Stock Exchange (NYSE).
• After a company goes public through an initial public offering (IPO), its stock becomes available for investors to buy and sell on an exchange.
• Investors will use a brokerage account to purchase stock on the exchange, which will list the purchasing price (the bid) or the selling price (the offer).
• The price of the stock is influenced by supply and demand factors in the market, among other variables.
• Risk is the potential for you to lose money.
• Pre-emptive right refers to the right granted to the stockholders to have the first option to subscribe to any issuance or disposition of shares from the capital stock in proportion to their respective shareholdings in the corporation.
• Another feature of common stock is that holders of these shares have voting rights.