Explain briefly what a common stock is, what purpose it serves and how it affects business investment decisions. (4)
A common stock, sometimes called a stock or share is another form of a security. This type of security represents a form of ownership in a corporation. It is a security that has a claim on the earnings and assets of the corporation, through dividends or residual part upon liquidation.
A common stock serves as a claim against the issuer of the stock by the holder of the stock certificate. It serves as way corporation use to obtain funds for investments. Common stock in the stock market is important in the business investment decision making, because the higher the stock price the large the amount the funds the corporation will get upon issuing new shares, and the greater is the funds available for investment.
