This means that whatever funds are leftover after all obligations have been met will accrue to the common shareholders. This is why stocks are considered a high risk proposition.
Common shareholders are the last to receive any benefit from the company's operations.
All debt and preferred shareholders have preference over common shareholders. Common Shares also have the feature of limited liability. This means that in the event of bankruptcy, investors lose at most their original investment. Common shareholders can also exercise their right to vote for the Board of Directors under whom the management team operates. Legally, the company must satisfy all current obligations and maintain various working capital provisions before earnings can be paid to common shareholders in the form of dividends.