Common stock explained to kids

Common stock is a type of ownership in a corporation. It represents the residual equity ownership of the corporation after all liabilities have been paid. When a corporation is first created, the founders will often invest money into the company by buying common stock. As the corporation grows and becomes more successful, it may sell additional shares of common stock to the public in order to raise capital. Common stockholders are typically entitled to vote on corporate matters and to elect the board of directors. They may also receive dividends, which are payments from the corporation's profits. However, common stockholders also bear the risk that the value of their shares may go down if the corporation experiences financial difficulties. In the event of bankruptcy, common stockholders are typically paid last, after creditors and preferred stockholders have been compensated. Overall, owning common stock can be a risky investment, but it can also offer the potential for high rewards.