March 4th, 2009 by Adam Gilloute

There are two types of classes of shares and these are Class A and Class B.

The two classes of shares determine what kind of voting rights do you have and that in turn determines what kind how much your opinion carries weight in the annual general meeting of the board.

Let us first discuss common stock, common stock is the common stock of share issued by the company and these common shareholders holding common shares elect a board of directors which in turn oversees the corporate policy. However common stock holders carry the maximum amount of risk because let us say if the company goes into liquidation then the company will first pay the debtors such as banks etc from whom they have taken loans and then they pay preferred stock holders and the last come the common stock holders which in all reality cannot ask for their share in the liquidation till everybody else is paid off.

But as a general stock market investor these comon shares are the ones which will generally appreciate more than anything else and that is where the higher risk pays off.

As compared to common stock the preferred stock is the one which will be paid off before the common stock shareholders. Preferred shareholders do not have any voting rights but they do get some amount of fixed dividend. The preferred stock is less risky than the common stock.

In the stock market you will keep hearing the terms Class A shares and Class B shares. Class A shares in a lot of cases have ten or five votes per share while on the other hand the Class B shares will have only vote per share. The reason for this classification is that companies will try to give more voting power to some kind of shares and certain type of investors.

Try not be a casual investor and make sure to read the company prospectus as well as various bylaws.

Finance and Money Management, introduction to stock market, investing, investing guide, stock marekt for beginners, stock markets gude, stocks, Type of share classes

February 16th, 2009 by Adam Gilloute

There are two types of classes of shares and these are Class A and Class B.

Well what are they, how much risk they carry and what happens to the stock in terms voting rights.It is these voting rights that determine who has the voice to be heard during the annual general meeting of the board.

Let us first discuss common stock, common stock is the common stock of share issued by the company and these common shareholders holding common shares elect a board of directors which in turn oversees the corporate policy. However common stock holders carry the maximum amount of risk because let us say if the company goes into liquidation then the company will first pay the debtors such as banks etc from whom they have taken loans and then they pay preferred stock holders and the last come the common stock holders which in all reality cannot ask for their share in the liquidation till everybody else is paid off.

However most investors who invest in the stock market will like to take risk anyway because the risk has its own rewards as the common shares will typically appreciate in value if the company is doing well.

Now if we compare common stock with the preferred stock the difference lies in the fact that the preferred share holders have claim on the earnings and assets before the common share holders and in the event of the bankruptcy preferred stock holders will be paid off after the creditors have been paid. The preferred share holders generally do not have any voting rights but yes they do have a certain amount of fixed dividend that is paid to them.

For giving more voting power to certain type of shares the companies have Class A and Class B shares. Class A shares will have five or may be ten votes per share whereas Class B shares will only have one vote per share. This way there is more voting power for certain section of investors.

Make sure to read the companies charter,bylaws and prospectus before investing as a careful investor is likely to make more money than a casual investor.

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