alleryStart learning →What does common stock represent?
AA loan made to the issuing corporation
BAn ownership interest in a corporation
CA promise of repayment by the corporation
DA guarantee of dividends from a company
Answer & Solution
Correct answer: B. An ownership interest in a corporation
1. Common stock is a security that represents an ownership interest in a corporation.
2. In corporations, the preferred and common stockholders are the owners.
3. Because they own rather than lend, common stockholders carry voting rights and a residual claim on income.
4. A company is never required to pay dividends, so holding common stock guarantees nothing.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 16 "Understanding Financial Management and Securities Markets", section 16.5 Equity Financing_
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