Common Stock
Equity ownership in a corporation carrying the right to vote, receive dividends if declared, inspect books, maintain proportionate ownership (preemptive rights), and claim residual assets last in a liquidation.
Authorized shares are the maximum the charter permits; issued shares have been sold; outstanding shares are issued minus treasury stock. Statutory voting allows one vote per share per board seat, while cumulative voting lets shareholders concentrate (aggregate) their votes — an advantage for small/minority investors trying to win a board seat.
The exam loves to rank you in a liquidation priority order: secured creditors first, then general (unsecured) creditors and debenture holders, then preferred stock, and common stock dead last as the residual claimant. Watch the voting trap: only common votes and holds the preemptive right, whereas preferred is typically non-voting but outranks common for both dividends and liquidation. Don’t confuse treasury stock (repurchased shares that carry no vote and pay no dividend) with outstanding shares. A second classic tell pairs common with rights — the preemptive right to buy new shares at a subscription price below market to protect proportionate ownership — versus a warrant, a long-dated sweetener (priced above market at issue), not an inherent common-stock right. Memory hook: common = last to eat, first to grow.
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