TYPES OF STOCK
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? Blue chip. A term that
describes the stock of well-established companies that have a track record of
paying dividends and gaining steadily in value. General Motors and IBM are
examples of blue chip stocks.
? Capital stock. The stock
authorized by a company's charter and listed in the capital accounts section of
its balance sheet.
? Common stock. Shares of
ownership that typically entitle holders to voting rights and to receive
dividends a company issues. If the company is liquidated, common stock holders
are last in line to receive a share of the company's assets.
? Hot stock. Newly issued stock
that is anticipated to increase in value rapidly.
? Large-cap, small-cap. The "cap"
here stands for capitalization, or the amount of money invested in a company.
Capital can be represented either by debt or equity (ownership). Large-cap
companies are capitalized with at least $5 billion, while small-cap companies
are capitalized with less than $1 billion. Generally speaking, small-cap
companies have much room for potential future growth, yet are more vulnerable to
? Non-voting stock. Stock that
does not carry voting rights. Most preferred stock is the non-voting kind.
? Penny stock. A highly speculative
stock that costs less than a dollar a share. Investors hope they will create
large returns on a small investment.
? Phantom stock. Not capital stock
at all, but a share of equity a company offers employees. It is typically not
? Preferred stock. A kind of
capital stock that pays a fixed dividend and typically lacks voting rights. If a
company's assets are liquidated, preferred stockholders have a higher claim to a
share of remaining assets than do common stockholders.
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