1. Common stock is a kind of stock that changes with the change of enterprise profits. It is the most common and basic stock in the capital composition of joint-stock companies and the basic part of joint-stock companies' funds.

the basic feature of common stock is that its investment income (dividends and dividends) is not agreed at the time of purchase, but determined afterwards according to the operating performance of the stock issuing company. The company's operating performance is good, and the income of common stock is high; On the other hand, if the business performance is poor, the income of common stock will be low.

common stock is the most important and basic share in the capital structure of joint-stock companies, and it is also the most risky share, but it is also the most basic and common one among stocks. The stocks listed on China Stock Exchange and Shenzhen Stock Exchange are common stocks.

Common stock represents the residual claim to a company's assets. After performing all other financial contracts of the company, the owner of common stock has the right to own any remaining assets.

2. Preference shares usually stipulate in advance that the dividend yield of preference shares is guaranteed by common shares with their distributable dividends (for example, after the profit distribution of common shares drops to zero, preference shares will not achieve dividend yield).

Preferred stock is actually a form of joint stock limited company similar to debt financing. Because the dividend rate of preferred shares is set in advance (actually the upper limit), the dividend of preferred shares generally does not increase or decrease according to the company's operating conditions.

generally speaking, the company can't participate in the dividend of the company's remaining profits, and it doesn't enjoy the owner's rights and interests other than its own price. If it is insolvent, the preferred stock will suffer losses.

for the company, because the dividend is relatively fixed, it does not affect the company's profit distribution. Shareholders of preferred shares cannot ask for withdrawal, but they can be redeemed by a joint stock limited company in accordance with the redemption clause attached to the preferred shares.

most preferred shares have redemption clauses. When the company is dissolved and the remaining property is distributed, that is, the claim right of preferred shares is prior to that of common shares and second to that of creditors.

Extended information:

There are three ways to call back the preferred shares:

1. Premium mode: Although the company redeems the preferred shares at a predetermined price, it often brings inconvenience to investors, so the issuing company often adds a "premium" to the face value of the preferred shares.

2. When the company issues preferred shares, it will set up a "sinking fund" from the funds obtained, which is dedicated to regularly redeeming a part of the issued preferred shares.

3. Conversion method: that is, preferred shares can be converted into common shares according to regulations. Although convertible preferred stock itself constitutes a kind of preferred stock, it is widely used in foreign investment circles.

It is also often regarded as a practical way to withdraw preferred shares, but the initiative of this withdrawal lies with investors rather than companies. For investors, it is very beneficial to do so when the market price of common stock rises.

Compared with other financing methods, raising capital by common stock has the following advantages:

1. Raising capital by issuing common stock is permanent, has no maturity date and does not need to be returned. This is extremely beneficial to ensure the company's minimum demand for capital and maintain the company's long-term stable development. Therefore, common stock can be used as a form of long-term equity incentive for companies.

2. There is no fixed dividend burden for raising funds by issuing ordinary shares. Whether or not dividends are paid and how much they are paid depends on whether the company has profit or not and its business needs. The financial burden brought by business fluctuations is relatively small. Since there is no fixed pressure to repay the principal and interest due for common stock financing, the risk of financing is small.

3. The capital raised by issuing ordinary shares is the most basic source of funds for the company, which reflects the company's strength and can be used as the basis for raising funds in other ways, especially to provide protection for creditors and enhance the company's borrowing ability.

4. Because the expected return of common stock is high and can offset the impact of inflation to a certain extent (usually, during the period of inflation, common stock will appreciate with the appreciation of real estate), it is easy for common stock financing to absorb funds.

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