a. Common stock – It is a security usually purchased for participation in the profits and control of ownership and management of the company. A common stockholder exercises control through voting rights during annual or special stockholders’ meetings, but can only claim rights to the company’s assets and earnings when preferred shareholders are already paid in full.
Most of the issues traded in the local stock market are common stocks.
Common stocks are also known as “ordinary shares.”
b. Preferred stock – It is a security whereby the holder has a higher claim on the assets and earnings of the company.
In terms of dividend payment and liquidation, preferred shareholders have priority over common shareholders. Though preferred stockholders do not have voting rights, they are entitled toreceive dividends before any dividends are paid to the common stockholders.
Preferred stocks usually have a specified limited rate of return or dividend and a specified limited redemption and liquidation price.
Preferred stocks are also known as “preference shares.”
According to OWNERSHIP
Common shares may further be classified into:
a. Class A – These are stocks that can be exclusively traded by Filipino investors.
b. Class B – These are stocks that can be bought and sold by both Filipino and foreign investors.
Both classes have the same privilege and receive the same amount of dividends. Such classification of common shares is done to monitor the equity ownership of both local and foreign investors.
