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.
Common stock is what we will discuss first and this stock of share is what is issued by the company in general and these shareholders who have the common stock then elect a board of directors which will make sure that the company has a good corporate policy. In terms of risk carrying the common stock carries maximum risk because once everyone is paid off only then can you as a common shareholder will be paid in the event of the liquidation of the company.
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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