stock / stäk/ • n. 1. the goods or merchandise kept on the premises of a business or warehouse and available for sale or distribution. ∎ a supply or quantity of something accumulated or available for future use: my stock of wine. ∎ farm animals such as cattle, pigs, and sheep, bred and kept for their meat or milk; livestock. ∎ short for rolling stock. ∎ (also film stock) photographic film that has not been exposed or processed. ∎ the undealt cards of the deck, left on the table to be drawn from in some card games. 2. the capital raised by a business or corporation through the issue and subscription of shares: the company's stock rose by 86%. ∎ (also stocks) a portion of this as held by an individual or group as an investment. ∎ (also stocks) the shares of a particular company, type of company, or industry: blue-chip stocks. ∎ securities issued by the government in fixed units with a fixed rate of interest. ∎ fig. a person's reputation or popularity. 3. liquid made by cooking bones, meat, fish, or vegetables slowly in water, used as a basis for the preparation of soup, gravy, or sauces. ∎ the raw material from which a specified commodity can be manufactured. 4. a person's ancestry or line of descent: her mother was of French stock. ∎ a breed, variety, or population of an animal or plant. 5. the trunk or woody stem of a living tree or shrub, esp. one into which a graft (scion) is inserted. ∎ the perennial part of a herbaceous plant, esp. a rhizome. 6. a herbaceous European plant (genus Matthiola) of the cabbage family, widely cultivated for its fragrant flowers, which are typically lilac, pink, or white. 7. (the stocks) [treated as sing. or pl.] hist. an instrument of punishment consisting of an adjustable wooden structure with holes for securing a person's feet and hands, in which criminals were locked and exposed to public ridicule or assault. 8. the part of a rifle or other firearm to which the barrel and firing mechanism are attached, held against one's shoulder when firing the gun. ∎ the crosspiece of an anchor. ∎ the handle of something such as a whip or fishing rod. ∎ short for headstock (sense 1). ∎ short for tailstock. 9. a band of white material tied like a cravat and worn as a part of formal horse-riding dress. ∎ a piece of black material worn under a clerical collar. 10. (stocks) a frame used to support a ship or boat out of water, esp. when under construction. • adj. 1. (of a product or type of product) usually kept in stock and thus regularly available for sale: 25 percent off stock items. 2. (of a phrase or expression) so regularly used as to be automatic or hackneyed: their stock response was “We can't take everyone.” ∎ denoting a conventional character type or situation that recurs in a particular genre of literature, theater, or film. ∎ denoting or relating to cinematic footage that can be regularly used in different productions, typically that of outdoor scenes used to add realism to a production shot in an indoor set. • v. [tr.] 1. have or keep a supply of (a particular product or type or product) available for sale. ∎ provide or fill with goods, items, or a supply of something. ∎ [intr.] (stock up) amass supplies of something, typically for a particular occasion or purpose. 2. fit (a rifle or other firearm) with a stock. PHRASES: in (or out of) stock (of goods) available (or unavailable) for immediate sale in a store. put stock in have a specified amount of belief or faith in: I don't put much stock in modern medicine. take stock review or make an overall assessment of a particular situation, typically as a prelude to making a decision: he needed to take stock of his life.
A security issued by a corporation that represents an ownership right in the assets of the corporation and a right to a proportionate share of profits after payment of corporate liabilities and obligations.
Shares of stock are reflected in written instruments known as stock certificates. Each share represents a standard unit of ownership in a corporation. Stock differs from consumer goods in that it is not used or consumed; it does not have any intrinsic value but merely represents a right in something else. Nevertheless, a stockholder is a real owner of a corporation's property, which is held in the name of the corporation for the benefit of all its stockholders. An owner of stock generally has the right to participate in the management of the corporation, usually through regularly scheduled stockholders' (or shareholders') meetings. Stocks differ from other securities such as notes and bonds, which are corporate obligations that do not represent an ownership interest in the corporation.
The value of a share of stock depends upon the issuing corporation's value, profitability, and future prospects. The market price reflects what purchasers are willing to pay based on their evaluation of the company's prospects.
Two main categories of stock exist: common and preferred. An owner of common stock is typically entitled to participate and vote at stockholders' meetings. In addition to common stock, some corporate bylaws or charters allow for the issuance of preferred stock. If a corporation does not issue preferred stock, all of its stock is common stock, entitling all holders to an equal pro rata division of profits or net earnings, should the corporation choose to distribute the earnings as dividends. Preferred stockholders are usually entitled to priority over holders of common stock should a corporation liquidate.
Preferred stocks receive priority over common stock with respect to the payment of dividends. Holders of preferred stock are entitled to receive dividends at a fixed annual rate before any dividend is paid to the holders of common stock. If the earnings to pay a dividend are more than sufficient to meet the fixed annual dividend for preferred stock, then the remainder of the earnings will be distributed to holders of common stock. If the corporate earnings are insufficient, common stockholders will not receive a dividend. In the alternative, a remainder may be distributed pro rata to both preferred and common classes of the stock. In such a case, the preferred stock is said to "participate" with the common stock.
A preferred stock dividend may be cumulative or noncumulative. In the case of cumulative preferred stock, an unpaid dividend becomes a charge upon the profits of the next and succeeding years. These accumulated and unpaid dividends must be paid to preferred stockholders before common stockholders receive any dividends. Noncumulative preferred stock means that a corporation's failure to earn or pay a dividend in any given year extinguishes the obligation, and no debit is made against the succeeding years' surpluses.
Par value is the face or stated value of a share of stock. In the case of common stocks, par value usually does not correspond to the market value of a stock, and a stated par value is of little significance. Par is important with respect to preferred stock, however, because it often signifies the dollar value upon which dividends are figured. Stocks without an assigned stated value are called no par. Some states have eliminated the concept of par value.
Blue chip stocks are stocks traded on a securities exchange (listed stock) that have minimum risk due to the corporation's financial record. Listed stock means a company has filed an application and registration statement with both the securities and exchange commission and a securities exchange. The registration statement contains detailed information about the company to aid the public in evaluating the stock's potential. Floating stock is stock on the open market not yet purchased by the public. Growth stock is stock purchased for its perceived potential to appreciate in value, rather than for its dividend income. Penny stocks are highly speculative stocks that usually cost under a dollar per share.
Stock is a form of ownership interest in a company and a way for companies to fund their growth. A share of stock in a company represents a fraction of ownership or equity in that company's assets and growth. In exchange for giving the shareholder a piece of ownership, the shareholder takes the risk that the earnings of the company will decline, which could reduce the value of the shareholder's initial investment. The buyer of a company's stock is willing to take this risk because if the company's earnings grow rapidly the stockholder gets to share proportionately in that wealth. For example, an investor bought $1000 of stock in Digital Equipment Corporation in 1991 saw the investment fall in value to $651 by 1996. But an investor who invested $1000 in the stock of EMC Corporation in 1991 saw that investment increase to $18,700 five years later. Some investors prefer investing in bonds because bonds assure them of a specific return on their investment. No bond, however, can promise the eighteen-fold growth EMC gave its stockholders between 1991 and 1996.
There are two basic forms of stock: common and preferred. In addition to an ownership stake in the company, common stock, also called "ordinary shares," entitles the shareholder to periodic payments of dividends, which are a share of the company's earnings, as well as a claim on the assets of the company if it goes bankrupt. Most common stock also gives the shareholder a right to vote on changes in the company's bylaws, on the election of corporate directors, and on any mergers with other companies. Holders of preferred stock usually do not have the same voting rights as common stockholders, but if the company goes bankrupt their share in its assets must be paid first before common stockholders receive their assets. Finally, the dividends that common stockholders are paid depend on the company's actual earnings, whereas preferred stockholders are always guaranteed a fixed dividend.
The practice of selling shares of stock arose as a way for companies to raise large amounts of capital for their projects. For example, the joint stock companies that took the financial risk of settling the New World did not need to rely only on banks or governments to raise funds—they could have raised the money they needed by selling shares to investors. Even in the late twentieth century many new companies started out as privately owned firms with a few owners and grew through bank loans or the investments of a few private investors. Many private firms reach a point in their growth where the only way to fund the massive investments they need to continue growing is by "going public," that is, to sell a stake in their ownership of their company to the broad public. In 1995, 107 billion shares of stock changed hands, and by 1997 the total value of all the stock traded on the New York Stock Exchange alone was $7.6 trillion.
See also: Bond, Capital, Investment, Joint Stock Company, Stock Market
A. trunk, stem OE.;
B. supporting structure; frame of timber for punishment XIV;
C. hollow receptacle XIV;
D. massive portion of an instrument XIV; (of a gun XVI);
E. line of descent XIV; F. part of hose (upper and nether; cf. STOCKING) XV; G. fund, store (as of money) XV; quantity XVII; H. object of contemptuous treatment XVI; I. stiff neckcloth XVII. OE. stoc(c) = OS., (M)Du. stok (G. stock stick), ON. stokkr trunk, block, log :- Gmc. *stukkaz, rel. to *stukkjam piece, repr. by OE. styċċe, OS., OHG. stucki (Du. stuk, G. stück), ON. stykki; of unkn. orig. Used adj. ‘kept in stock’ XVII.
Hence stock vb. in various senses, †‘put in the stocks’ being the earliest (XIV). ‘supply with a stock of’ the latest (XVII) in appearance. Comp. stock-dove wild pigeon. XIV; perh. so called from its breeding in hollow tree-trunks. stockfish cod, etc. split open and dried. XIII. — (M)Du., (M)LG. stokvisch, variously expl. stockgillyflower plant of the genus Matthiola. XVI; so called from its woody stem; abbrev. stock XVII. stockstill motionless. XV.