Learn how stocks represent ownership, how equity is issued and traded, and how stock characteristics affect investor rights, risk, and return.
Stocks are core U.S. securities exam material because they connect corporate finance, investor rights, market trading, and portfolio risk in one product category. Strong answers require more than memorizing that stock means ownership. You need to know what rights common and preferred shareholders actually hold, how new shares reach the market, how equity trades across venues, and why stock investing can produce both substantial upside and substantial volatility.
Why This Chapter Matters
Later questions on suitability, offerings, disclosure, portfolio construction, and market structure often assume you can distinguish common from preferred stock, primary issuance from secondary-market trading, and income features from ownership features. This chapter builds those distinctions directly.
Focus on rights, priority, and market mechanics. When a fact pattern mentions stock, ask who owns the claim, who gets paid first, whether the issuer receives proceeds, what the quote or trading venue is telling you, and whether the question is really about risk, income, control, or liquidity.
Learn how companies bring stock to market, how IPOs differ from follow-on offerings, and how to distinguish issuer proceeds from selling-shareholder proceeds.
Evaluate how common-stock returns are earned, what risks drive equity prices, and how suitability depends on time horizon and tolerance for volatility.