▲Common stocks: Common stocks, also known as equity securities or equities², represent ownership shares in a corporation.

●Residual³ claim means that stockholders are the last in line of all those who have a claim on the assets and income of the corporation.

●Limited liability means that the most shareholders⁵ can lose in the event of failure of the corporation is their original investment.

▲Preferred Stocks: Preferred stock is like a perpetual bond. A given dollar amount is to be paid each year by the issuer to the investor⁶.

—The cumulative⁷ preferred stocks are the preferred stocks that all previously⁸ unpaid⁹ preferred stock dividends¹¹ must be paid before any dividends may be paid on the common stock.

—The uncumulative preferred stocks are the preferred stocks that all previously unpaid preferred stock dividends needn’t be paid.

—The adjustable¹² rate preferred stock is preferred stock that the dividend¹⁰ is reset¹³ periodically in terms of an applicable rate. The auuualized “percent of par” for the dividend might be reset every three months to be equal to the largest of the rates on: (1) three-months Treasure bills;(2)ten-year Treasury¹⁴ bonds;(3)20-year Treasure bonds.

—The callable preferred stocks are callable at a stated redemption price.

—Participating preferred stock entitles the holder⁴ to receive extra dividends when earnings¹⁵ permit.

—Convertible preferred stock may, at the option of the holder, be converted into another security (usually the firm’s common stock) on the stated terms.