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Stocks

Stocks and bonds are both different kinds of financial instruments that constitute assets and liabilities. If you own stocks or bonds you own the asset, the organization that issued the stocks or bonds will record them as liabilities on their books. The owners of the common stock in a company are the creditors with the last right to receive funds if a company is liquidated. This has an upside in addition to a downside. On the downside if a company is liquidated then all the creditors line up to receive what they can and the owners of the common stock are the last in line. On the upside if you have a controlling stake in the common stock you control the company, but also the owners of common stock stand to gain the most if the company is profitable. The owners of preferred stock will get paid before the owners of common stock in the case of a liquidation. Preferred stock will also typically receive different dividend payments than common stock holders.

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