C10 (2)

• Common stock: an equity investment represents ownership in corporate form of business. Shares: fractional ownership interest in firm. Enables investors to participate in profits of firm.
• Residual Claim: In case of bankruptcy, last to be paid after payment made to bondholders and preferred stockholders. Dividend payment only after bondholders and preferred stockholders are paid first

  Voting rights: common shareholders vote important matters, public listed companies required by law have AGM to approve company accounts, auditors and board of director appointment.

  Common stock no maturity, held in perpetuity. if shareholders dies, share inherited by next kin.
• Election of BOD: shareholders appoint directors as representative. Director appointed to work for shareholder's interest.

  Majority ownership lead appointment on Board of Directors. major shareholders; institutional investors choose engage directly with company's management make sure stewardship of company.

  Authorisation to issue new common stock. Additional capital raised via rights/bonus issue

  Easy to buy & sell, modest transaction costs. Secondary market, buyers and sellers trade frequently with high degree of liquidity and lower fees.
• Price and market information widely disseminated in news and financial media. Investors obtain quoted price each company in stocks exchanges and any finance related news which report company ongoing project and expansion.
• Advantages investors

  no limit to stock's capital gains potential. Higher return due to higher risk.

  dividend yield. stocks provide regular current income in form of annual dividends. not all shares gives dividend, most income-producing stocks, dividends grow over time, adding more to stockholder's return.

  highly liquid, easily transferable. easier to sell, listed on bursa malaysia. transaction costs low.

  market information available, daily/financial newspaper

  shareholders, owners of company have voting rights, make decisions.
• no maturity date.

  appointed to board if shareholder own many shares

  Pre-emptive rights. want issue new shares, company give first right of refusal to existing shareholders based on amount of shares they hold.
• Disadvantages investor

  risk. share price volatile.

  firm residual owners, no guaranteed return. Bankruptcy, bond holders and preference shareholders have to be paid first.

  prices wide swings, making valuation difficult.

  Issuance of common stock, ownership control. Shareholders lose control of company if person purchase shares in market and becomes director of company.
• right issues: offer to existing shareholders to subscribe for more shares, proportion to existing holding, cheap price. Made by quoted or an unquoted company seeking limited finance without offering shares to non-shareholders.