Preferred stock typically pays regular dividends and is favored by investors who want income foremost from their stocks. Common stock represents ownership of a company and may offer more rights and privileges than preferred stock. Investors may purchase stock on the primary or secondary market. A company sells its stock to the public on the primary market through its initial public offering. Investors may sell their shares through brokers to other investors on the secondary market.
Businesses issue stock to raise money.
They use this money to finance expansions, pay for equipment, and fund projects, etc. Corporations issue stock when they may need additional capital to operate successfully. The fancy term for issuing stock to raise money is equity financing. The money received from investors who buy stocks is called equity capital. The other method of raising money is debt financing, which involves selling bonds.