Common Stock

Common Stock

The term common stock is a form of corporate equity ownership, a type of security. It is called “common” to distinguish it from preferred stock. In the event of bankruptcy, common stock investors receive their funds after preferred stock holders, bondholders, creditors, etc.

when people talk about stocks they are usually referring to this type which is known as Common stock is, well, common.  . In fact, the majority of stock is issued is in this form. We basically went over features of common stock in the last section. Common shares represent ownership in a company and a claim (dividends) on a portion of profits. Investors get one vote per share to elect the board members, who oversee the major decisions made by management.

Over the long term, common stock, by means of capital growth, yields higher returns than almost every other investment.

Common stock is usually voting shares, though not always. Holders of common stock are able to influence the corporation through votes on establishing corporate objectives and policy, stock splits, and electing the company’s board of directors.

The term common stock is a form of corporate equity ownership, a type of security. It is called “common” to distinguish it from preferred stock. In the event of bankruptcy, common stock investors receive their funds after preferred stock holders, bondholders, creditors, etc.

when people talk about stocks they are usually referring to this type which is known as Common stock is, well, common.  In fact, the majority of stock is issued is in this form. We basically went over features of common stock in the last section. Common shares represent ownership in a company and a claim (dividends) on a portion of profits. Investors get one vote per share to elect the board members, who oversee the major decisions made by management.

Over the long term, common stock, by means of capital growth, yields higher returns than almost every other investment.

Common stock is usually voting shares, though not always. Holders of common stock are able to influence the corporation through votes on establishing corporate objectives and policy, stock splits, and electing the company’s board of directors.

Preferred Stock

A class of ownership in a corporation that has a higher claim on the assets and earnings than common stock. Preferred stock generally has a dividend that must be paid out before dividends to common stockholders and the shares usually do not have voting rights.

The precise details as to the structure of preferred stock is specific to each corporation. However, the best way to think of preferred stock is as a financial instrument that has characteristics of both debt (fixed dividends) and equity (potential appreciation). Also known as “preferred shares”.

There are certainly pros and cons when looking at preferred shares. Preferred shareholders have priority over common stockholders on earnings and assets in the event of liquidation and they have a fixed dividend (paid before common stockholders), but investors must weigh these positives against the negatives, including giving up their voting rights and less potential for appreciation.

Stock Certificate

In a corporate it is the Paper evidence of ownership. The certificate would indicate the type of stock (common, preferred), any restrictions pertaining to the sale of the stock, the number of shares, the par value, etc. Today, the larger corporations with many shareholders are likely to use electronic records instead of issuing the paper stock certificates.

In corporate law a stock certificate which is also known as certificate of stock or share certificate, is a legal document that certifies ownership of a specific number of stock shares in a corporation.

Stock certificates are generally divided into two forms:

Registered stock certificates:
Bearer stocks certificates:

A registered stock certificate is normally only evidence of title, and a record of the true holders of the shares will appear in the stockholder’s register of the corporation.
A bearer stock certificate, as its name implies is a bearer instrument, and physical possession of the certificate entitles the holder to exercise all legal rights associated with the stock
Usually only shareholder with stock certificates can vote in a shareholders’ general meeting. Sometimes a shareholder with a stock certificate can give a proxy to another person to allow them to vote the shares in question. Voting rights are defined by the corporation’s charter and corporate law.

Brokerage account

These accounts allow you to purchase stocks, bonds, mutual funds, and other investments by paying professionals to buy or sell the items you tell them to. The fee you pay them is called a “commission”. One can choose between either a discount or traditional broker. Traditional brokerages provide a wider range of services, and have the price tag to match. They serve along the lines of professional money managers and can offer advice as to what investments might be right for you.

In opening a new account, the minimum investment can vary. Most offer the option of either having an application form sent to you, or allowing you to fill them out online, print them, and mail them in with a check. The process is easy and can be done fairly quickly at almost all financial institutions.

Kinds of brokerage accounts.

There are three kinds of brokerage accounts. The most basic kind is a cash management account, into which investors place money in order to make trades. There must be enough money in the account to cover the trade at the time of its execution.

A second, more sophisticated kind of brokerage account is a margin account, which allows an investor to buy securities with money borrowed from the broker.

A third kind of brokerage account is a discretionary account, which permits the broker to buy and sell shares for the investor without first contacting the investor for approval.

Trading Account

For trading a trading account is needed a Trading Account Mean

1. An account similar to a traditional bank account, holding cash and securities, and is administered by an investment dealer.

2. An account held at a financial institution and administered by an investment dealer that the account holder uses to employ a trading strategy rather than a buy-and-hold investment strategy.

Though trading accounts are traditionally thought to hold only stocks, a trading account can hold cash, foreign cash, securities and a number of other types of investments.

Investors who use a number of trading strategies or have a number of brokerage accounts may separate their accounts in order to avoid confusion. One account may be a registered account for their retirement savings; another account may be a buy-and-hold account for their long-term stocks; another may be a margin account; and another may be a trading account used for conducting day-trading activities.

Trade credit

This type of credit exists when one firm provides goods or services to a customer with an agreement to bill them later, or receive a shipment or service from a supplier under an agreement to pay them later. It can be viewed as an essential element of capitalization in an operating business because it can reduce the required capital investment to operate the business if it is managed properly. Trade credit is the largest use of capital for a majority of business to business (B2B) sellers in the United States and is a critical source of capital for a majority of all businesses.

There are many forms of trade credit in common use. Various industries use various specialized forms. They all have, in common, the collaboration of businesses to make efficient use of capital to accomplish various business objectives.

For many borrowers in the developing world, trade credit serves as a valuable source of alternative data for personal and small business loans. For example, Wal-Mart, the largest retailer in the world, has used trade credit as a larger source of capital than bank borrowings; trade credit for Wal-Mart is 8 times the amount of capital invested by shareholders.

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Short Term Trading

Short-term trading refers to the trading of stocks and other securities over brief periods of time, such as a few weeks or months. Short-term trading should not be confused with day trading, where stocks are bought and sold within the span of one trading day. In general, those who practice short-term trading rely heavily on technical analysis and tools such as charts and graphs in order to make decisions about how and when to place a trade. This differs from a strategy of fundamental analysis, where an investor will research a company’s earnings, history, management, balance sheet, labor relations and other “fundamental” factors before purchasing or selling the company’s stock.

An investor who uses short-term trading has little practical use for fundamental analysis because of the time and effort involved in it. A short-term trader is much more concerned with where the price of a stock is at the moment, and where it is going in the near future. It is often easier for a trading novice to become familiarized with technical tools such as charts and algorithms than it is to learn what makes a company strong and therefore a good long-term investment. Because of this, short-term trading is very popular, especially in times when stock markets have a general upward trend.
One very common type of short-term trading is swing trading. This consists of buying a stock with the hope of taking a profit within a few days or weeks. The ideal environment for swing trading is when the market is not exhibiting any particular trend, but will go up for a few days and down for a few days, alternately. A swing trader aims to take advantage of these fluctuations, with no regard for the fundamentals of the underlying company, since these don’t normally change over a period of days.
Position trading involves holding a stock for a few months, or perhaps as much as a year. A position trader, as opposed to a swing trader, has a somewhat long-term outlook. In this case, fundamentals can be important to consider, especially if they indicate the potential for a rise in price which may not fully play out for months. While still considered a type of short-term trading, it is not usually subject to the level of risk associated with day trading or swing trading.

International trade

It is exchange of capital, goods, and services across international borders or territories. In most countries, it represents a significant share of gross domestic product (GDP).

The International trading economic, social, and political importance has been on the rise in recent centuries. Industrialization, advanced transportation, corporations, outsourcing globalization and multinational are all having a major impact on the international trade system.

International trade is a major source of economic revenue for any nation that is considered a world power. Without international trade, nations would be limited to the goods and services produced within their own borders.
The principle of  International trade is not different from domestic trade as the motivation and the behavior of parties involved in a trade does not change fundamentally depending on whether trade is across a border or not. The main difference is that international trade is typically more costly than domestic trade. The reason is that a border typically imposes additional costs such as tariffs, time costs due to border delays and costs associated with country differences such as language, the legal system or a different culture.

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Trade finance

It refers to the various terms of financial support and financial transactions used in international trade. Trade finance uses a range of instruments to provide finance to exporters and importers, including documentary credits such as letters of credit.

It’s a science that describes the management of money, banking, credit, investments and assets for international trade transactions.
It is the mechanisms by which firms engaged in trade cover its costs, including borrowing, forfaiting, etc. It is an imprecise term covering a number of different activities like seasonal and stocking finance, as well as import and export finance and funding for large one-off transactions. Financial techniques used to fund the manufacture, sale and delivery of goods to foreign buyers. Trade finance also includes techniques that are used to monetize accounts receivables that result from international commercial transactions.

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Letter of credit

Letter of Credit is abbreviated as an LC or L/C, and often is referred to as a documentary credit, abbreviated as DC or D/C, documentary letter of credit, or simply as credit.

It’s a document issued mostly by a financial institution, used primarily in trade finance, which usually provides an irrevocable payment undertaking, it can also be revocable, confirmed, unconfirmed, transferable or others e.g. back to back: revolving but is most commonly irrevocable/confirmed to a beneficiary against complying documents as stated in the Letter of Credit.
Once the beneficiary or a presenting bank acting on its behalf, presents to the issuing bank or confirming bank, if any, on or before the expiry date of the LC, documents complying with the terms and conditions of the LC, the applicable UCP and international standard banking practice, the issuing bank or confirming bank, if any, is obliged to honour irrespective of any instructions from the applicant to the contrary.

Letters of credit are used primarily in international trade transactions of significant value, for deals between a supplier in one country and a customer in another. They are also used in the land development process to ensure that approved public facilities (streets, sidewalks, stormwater ponds, etc.) will be built.