We can work on “Common stock” and evaluate its key characteristics.

Summarize the term “common stock” and evaluate its key characteristics. Determine the two major markets for the sale of stock, as well as the concepts of “bull market” and “bear market.”

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Common stock represents ownership in a corporation. As a shareholder, you have a claim on the company’s assets and earnings. This ownership typically comes with voting rights, allowing you to participate in key corporate decisions like electing board members.

Key Characteristics of Common Stock:

  • Ownership: Represents ownership in a company.
  • Voting Rights: Shareholders can vote on important company matters.
  • Dividends: Companies may distribute a portion of their profits to shareholders in the form of dividends.
  • Residual Claim: In the event of liquidation, common stockholders have a residual claim on the company’s assets after creditors and preferred stockholders have been paid.

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  • Risk: Common stock is considered a riskier investment than bonds or preferred stock, as its value can fluctuate significantly based on market conditions and company performance.

Major Markets for Stock Sales

  1. New York Stock Exchange (NYSE): One of the world’s largest stock exchanges, the NYSE is known for its traditional trading floor where brokers buy and sell stocks.
  2. Nasdaq: The Nasdaq Stock Market is a global electronic marketplace for securities, including stocks, bonds, and options. It is particularly known for technology and biotechnology stocks.

Bull and Bear Markets

  • Bull Market: A bull market is characterized by a sustained period of rising stock prices. It’s often associated with optimism, economic growth, and investor confidence.
  • Bear Market: A bear market is characterized by a prolonged period of declining stock prices. It’s often associated with economic downturns, pessimism, and investor fear.

Understanding these terms is crucial for anyone considering investing in stocks. By understanding the fundamentals of common stock, you can make informed investment decisions and navigate the complexities of the stock market.

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