What does common stock represent?

• A. Equity ownership of a corporation
• B. Fixed dividend only
• C. Priority claim on assets
• D. Debt instrument

Answer: (A)

Common stock represents equity ownership in a corporation. Owning it means you’re a part-owner with a stake in the company’s future profits and assets after creditors are paid. Dividends on common stock aren’t fixed and depend on the company’s earnings and board decisions, so there’s no guaranteed payment. It also does not provide a priority claim on assets in liquidation—that privilege goes to creditors and, in some cases, to preferred stock—nor is it a debt instrument, since it creates ownership rather than a fixed obligation.