common stock investment & finance definition

An ownership interest in a company. Unlike preferred stock, common stock has no priority for dividend payments or any repayment in bankruptcy. Investors holding common stock can lose only as much as the amount invested. An owner of common stock is referred to as a stockholder or shareholder. Common stockholders may earn dividends and may see the share price rise, which produces profits. Common stock is more risky than preferred stock in that if funds are limited to pay dividends, preferred stockholders are paid first. In the case of liquidation or bankruptcy, preferred shareholders may receive preferential treatment over common shareholders. Common stockholders, however, typically have more voting rights than do preferred shareholders.