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Financial Terms and Glossary

Ordinary shares

Ordinary Shares

Ordinary shares, also known as common shares, represent ownership in a company and entitle shareholders to vote on important company decisions, such as electing the board of directors and approving mergers. Ordinary shareholders typically have the right to receive dividends, although these are not guaranteed and are paid after preferred shareholders. In the event of liquidation, ordinary shareholders are last in line to receive any remaining assets.

Example

An investor buys 1,000 ordinary shares in a technology company, giving them voting rights and the potential to receive dividends based on the company’s financial performance.

Key points

• Represent ownership in a company, granting shareholders voting rights.

• Entitle shareholders to dividends, paid after preferred shareholders.

• Ordinary shareholders are last in line to receive assets in case of liquidation.

Quick Answers to Curious Questions

What distinguishes ordinary shares from preferred shares?

Ordinary shares provide voting rights and dividends are not guaranteed, while preferred shares offer fixed dividends and no voting rights.

Why are ordinary shares attractive to long-term investors?

They offer potential for capital growth, dividends, and voting power in company decisions.

What happens to ordinary shareholders in a liquidation event?

Ordinary shareholders are the last to be paid, receiving assets only after creditors and preferred shareholders have been compensated.

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