Domestic

Lesson

This lesson will discuss domestic common stock, a type of equity security. Domestic common stock represents ownership in a company based in the same country as the investor. As a shareholder, you can vote on company matters and receive dividends if declared. The value of common stock can fluctuate based on the company's performance and market conditions.

Practice Question #1

Which of the following best describes domestic common stock?

A) Shares of ownership in a foreign company

B) A type of investment fund that holds a basket of stocks

C) Shares of ownership in a company based in the same country as the investor

D) A security representing ownership in a foreign company, traded on U.S. stock exchanges

Select an option above to see an explanation here.

A) Shares of ownership in a foreign company are considered foreign stock. B) an exchange-traded fund (ETF) is a type of investment fund holding a basket of stocks. C) Shares of ownership in a company based in the same country as the investor are domestic common stock. D) A security representing ownership in a foreign company traded on U.S. stock exchanges is an American Depositary Receipt (ADR).

Terms

Domestic common stock:: Shares of ownership in a company based in the same country as the investor.
Equity security:: A financial instrument representing ownership in a company.
Dividends:: Payments made by a company to its shareholders, usually from profits.
Voting rights:: The right of shareholders to vote on company matters, such as electing directors and approving mergers.
Market capitalization:: The total value of a company's outstanding shares of stock.
Shareholder:: An individual or entity that owns shares of a company's stock.

Practice Question #2

What rights do domestic common stock shareholders typically have?

A) Priority in dividend payments and liquidation

B) Voting rights and the right to receive dividends, if declared

C) The right to convert their shares into bonds

D) The right to receive a fixed dividend payment

Select an option above to see an explanation here.

A) Priority in dividend payments and liquidation is a characteristic of preferred stock. B) Voting rights and the right to receive dividends, if declared, are typical rights of domestic common stock shareholders. C) The right to convert their shares into bonds is a characteristic of convertible securities. D) The right to receive a fixed dividend payment is a characteristic of preferred stock.

Do Not Confuse With

Foreign stock:: Shares of ownership in a company based in a different country than the investor.
American Depositary Receipt (ADR):: A security representing ownership in a foreign company traded on U.S. stock exchanges.

Practice Question #3

Which of the following is NOT a characteristic of domestic common stock?

A) Represents ownership in a company based in the same country as the investor

B) Has priority over preferred stock in dividend payments and liquidation

C) Shareholders have voting rights on company matters

D) The value of the stock can fluctuate based on the company's performance and market conditions

Select an option above to see an explanation here.

A) Represents ownership in a company based in the same country as the investor is a characteristic of domestic common stock. B) Having priority over preferred stock in dividend payments and liquidation is a characteristic of preferred stock, not domestic common stock. C) Shareholders having voting rights on company matters is a characteristic of domestic common stock. D) The value of the stock fluctuating based on the company's performance and market conditions is a characteristic of domestic common stock.

Historical Example

In the early 20th century, a large industrial company decided to go public and issued its first shares of domestic common stock. The IPO succeeded, and the company's stock price increased significantly. The company paid regular dividends to its shareholders and became one of the largest companies in its country.