Ordinary shares and Preference shares
An ordinary share defines a single unit of equity ownership of a corporation, where the holders of the ordinary shares receive the right to cast a vote in decisions involving important corporate matters. Such votes are available to each ordinary shareholder in correspondence to the number of ordinary shares held within the company. Ordinary shareholders are the last to receive dividends, and are only entitled to funds which remain after dividends on preferred shares are paid. Ordinary share holders may not receive dividend payments every year, and payments to ordinary shareholders depend on reinvestment decisions made by the company directors. In an event of the company facing liquidation, the ordinary shareholders will be the last to receive their share of funds, after the creditors and preference shareholders are paid. As such ordinary shares are riskier than bonds or preference shares. Ordinary shares are also referred to as ‘common stock’.
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