A stock is a financial instrument that represents the ownership of a fraction of a company.
Companies sell stock to raise funds. They decide on the number of shares of their stock they want to issue. These so called outstanding shares are traded at an exchange, such as the Nasdaq.
A company issues 1000 shares of stock. If you buy 100 outstanding shares you own 10% of the company and are now a shareholder.
There are several types of stock
- Common Stock
Gives shareholders voting rights on certain decisions.
- Preferred Stock
Gives shareholders no voting rights on decisions, but a higher claim on earnings and assets.
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