What are Common stock, Preferred stock and Debenture?

You might have heard about common stock and debenture but not many people have heard about “Preferred Stock”. Investment is not a complicated thing to do at all since there is plenty of information from various sources. Learning how to do investment can make much more profit than just buying savings. Today we are going to talk about what Common stock, Preferred stock and Debenture are. Summary that is easy to understand in ACU style. Let’s start.

What is common stock?

It is an instrument issued by a public limited company or a private company. The owner of the company can be a stockholder and also has the right to vote according to the proportion of the stocks. For example, Dividend payment, capital increase or a merger. The common stockholders have the right to receive dividends when the company gains profits. Also get a chance to acquire the right to subscribe for new shares when the company raises its capital.

What is Debenture?

It is a debt instrument issued by a private sector to raise the fund for affairs. For example, expansion for business field expansion, equipment purchasing, additions or other construction purposes. Debenture can be divided into units. Each unit is equal to 1,000 baht. Mostly the minimum rate of Debenture is 100,000 baht. The borrower needs to do a contract to assure that the borrower can pay back the borrowed money with the interest according to the date and time of the debenture. The debenture holder will be a creditor of the company that issued the debenture.

What is Preferred Stock?

It is a mixture of common stock and debenture. It is a debt instrument in which the stockholder can be the owner of the company just like common stock. However, the stockholders do not have any right to vote. If the company has earned profit from the operation, the Preferred stockholder can get the dividend at the steady rate. If the business is closed down, the Preferred stockholder has the right to get the money back before the common stockholders. If the company needs to sell property to pay debt, the order to pay is to the debenture holder first, the second is the Preferred shareholder and the last one is the common stockholder. The preferred stock has no limit for time and date to pay capital. Thus, the preferred stock is considered to be a long term investment like the common stock. 

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