Definition of 'Capital Stock'
The capital stock of a company is divided into two categories: common stock and preferred stock. Common stock is the most basic form of ownership in a company. It gives shareholders the right to vote on company matters and to receive dividends, if any are declared. Preferred stock is a more senior form of ownership than common stock. It gives shareholders a higher priority claim on the company's assets and earnings than common shareholders.
The capital stock of a company is important for several reasons. First, it represents the amount of money that shareholders have invested in the company. This information is important for investors who are considering investing in a company. Second, the capital stock of a company can be used to calculate its earnings per share (EPS). EPS is a measure of a company's profitability and is used by investors to compare companies. Third, the capital stock of a company can be used to calculate its debt-to-equity ratio. The debt-to-equity ratio is a measure of a company's financial leverage and is used by investors to assess a company's risk.
Capital stock is an important concept in corporate finance. It represents the amount of money that shareholders have invested in the company and is used to calculate several important financial ratios.
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