Common Shares Or Common Stock
Updated on March 11, 2023
Common stock refers to the shares issued by a company. Common stockholders are the ‘owners’ of the company with voting rights and they earn dividends on the shares, as and when declared. Common stockholders can be the company’s promotors, key personnel or other retail investors. Common stock or shares are issued initially by a company through an IPO in the Primary market.
Calculation of Common stock:
Common Stock = Number of shares issued – Treasury shares
(Treasury shares or Treasury Stock refers to shares bought back by the company)
Reasons for issuing Common stock
Reasons for issuing Common stock are:
1. For raising capital for business expansion.
2. For paying off companies’ debts.
3. For accumulating capital for future use.
4. For acquisitions/mergers.
5. For creating a mix of debts.
Benefits for investors
Benefits of common stock for investors are:
1. Participation in the company’s growth.
2. Earning profits through capital appreciation and dividends.