Common Stock

Common stock refers to the certificate issued to owners of a corporation.   Common stock’s financial value is located in the equity section of the balance sheet.  Common stock is sold to raise capital for business operations and fixed asset purchases.

Stock

Stock

The one single term mostly equated to capitalism is ‘Stock’.  When a business is incorporated, stock is the core medium of exchange for the investment.  The company issues a certificate referred to as stock in exchange for the investment – most often cash.  This is the one true form of pure risk.  Most other forms of investments generally have some form of collateral, credit, or cash flow to substantiate the investment.

Common Stock – Definition

Common Stock

A document indicating ownership in a corporation is often referred to as common stock.  It identifies an equity position in a business. The document or certificate is commonly referred to as a security and provides certain rights to the holder (owner).  These rights include voting and residual value upon liquidation of the company.

What is an S-Corporation?

S-Corporations

Within the family of corporations, the Internal Revenue Service (IRS) grants tax free status to S-Corporations.  It is strictly an IRS term.  In the IRS code, there are several subchapters pertaining to corporations; Subchapter S identifies and regulates S-Corporations.  In essence, S-Corporations are a pass through entity meaning that all income, losses, credits and special deductions are pass-through to the stockholders of the company.

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How to Read a Balance Sheet – Equity Section (Simple Format)

Stock

The equity section of the balance sheet equals assets minus liabilities.  Traditionally the equity section is referred to as the net worth of the company.  If you were to dispose of all the assets through a sale and pay off liabilities, the money left over would be available for distribution to the shareholders.  The shareholders basically own the equity section of the balance sheet. 

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