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7 Key Difference between Common Stock and Preferred Stock

7 Key Difference between Common Stock and Preferred Stock

What is the Common Stock?

Common Stock are stocks which is issues to general public by trading platform.In other way,we can say who person bought shares from NSE or BSE in current market at current price through trading account its known as Common Stock or Equity Shares.Mostly individual or retailer trader keeps common stock or equity shares in demat account.Common stock can sell at any time for making profit.Traders can buy any quantity of Common Stocks.

Common Stockholders Rights and Importance

1.Right for vote

Common Stockholders have rights for choose or voting for /Board Of Directors of Company.

2.Right to ownership of company

Common Stockholders have right for ownership of company that means all shareholder as owner according share quantity ratio.

3.Right to received Dividends

Common Stockholders keep right for received dividends.This dividend varies according to company performance.

4.Right to Sell Common Stock at any time

Common Stockholders can sell share at any time for making profit.

5.Common Stock or Equity share Risk and Return 

Common Stocks or Equity share comes into high risk and high returns category according stock market ups and downs.

6.Common Stockholders is part of management

Common Stockholders is part of company management,they can vote for choose board of directors.

7.Company can buyback of Common Stocks

Company can buyback of common stocks or equity share at any time for minimize outstanding shares in a market.

8.No Fixed Return 

Company never gives fixed return on common stock or equity shares to share holder,its depend on market ups and downs.

9.Company not gives compensation 

Company is not bounded for gives compensation in terms of company wind up,in this case company not gives any price to common shareholders.

What is the Preferred Stock

Preferred Stock buy by financial institution,Private firm and rich family.Preferred stock different from Common Stocks.Preferred stock has preference right over common stock with respect to dividend of share or liquidation procedures.
Preferred Stock gives fixed dividend to financial institutions or private firm etc.

Preferred Stockholder Rights and Importance

1.No Ownership Right

Preferred Stockholders have not rights of ownership of company in terms of vote to choose board of directors.

2.Fixed Dividends

Company gives fixed dividend to Preferred stockholders,company has committed for this,if the company any time not gives dividend ,its can gives two or three dividends together to preferred stockholders.

3.In Case of Company default

If the company default in future,company compensate to preferred stockholder firstly.

4.Preferred Stock can't sell

Preferred stock can't sell in cash market by parties.

5.No Risk and Fixed Return

Preferred stockholders have no risk and they takes fixed returns on investment.

7 Key Difference between Common Stock and Preferred Stock

1.Common Stocks bought by individual or retailer investors and Preferred Stocks bought by financial Institution or Private firms.

2.Common Stocks is traded in cash market and Preferred Stock is not traded.

3.Common Stockholders takes dividend when company in profit zone but Preferred stockholder regular dividend in any case,company gives dividend if company in also loss.

4.Common Stock can sell at any time in cash market but Preferred Stock can't be sell in cash market.

5.Common Stock is comes into high risk and high return because when company share price on above of buying price its gives profit but when company share price on below of buying price then investor in losses but Preferred stock holder never takes losses,they always on fixed dividend on regular basis.

6.Preferred Stockholder have exit option in this category through buyback of  company or preferred stock convert into equity share and Common Stockholders exit from sell shares in cash market.

7.Preferred Stock is not effected of regular ups and down of markets and no impact of any company result or bad news or politics news on preferred stocks but Common stock effected by daily market graph or ups and downs or market index.

This is main deference or definition of Common Stock and Preferred Stock but both of stocks raise fund for company.In short common stock buy by any persons and preferred stock bought by big firm for fixed return.

Hope you understand this article,7 Key Difference between Common Stock and Preferred Stock,if there is any question related to this article, then you can ask and comment.

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