When individuals start to invest, they consider common stock or mutual funds invested in equities (common stock).
Issuing common and preferred stock is an important source of financing for corporations but this creates new management difficulties.
The earnings of the corporation are divided by the number of shares.
Current owners do not want their current return to decrease which will happen if the total earnings do not increase.
Write a 2-3 page paper describing the characteristics of stock and ensure the following points are addressed.
Explain three characteristics of common stock that are different from bonds.
Explain how return on equity (ROE), return on assets (ROA), and price earnings ratio (P/E) are affected when new common stock is issued by a corporation.
Identify two different factors that affect stock price besides issuing new shares or repurchasing shares and how the price is affected.
Explain the difference between common and preferred stock.
