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Definition of Common Stock Common stock represents ownership in a company. When you buy common stock, you’re essentially buying a small slice of that business. As a shareholder, you’re entitled to a portion of the company’s profits (usually in the form of dividends if paid), and you have voting rights to help elect the board of directors or vote on major company decisions. Think of common stock as your seat at the table—albeit maybe at the back if you only own a few shares.

What is Preferred Stock? Preferred stock is a type of ownership in a company that has a higher claim on assets and earnings than common stock. That means if the company pays dividends, preferred shareholders get theirs first. If the company goes belly-up (let’s hope not), preferred shareholders also get paid before common stockholders—though still after bondholders.

Definition of Value Stock A value stock is a share of a company that appears to be trading for less than its intrinsic value. Think of it as a great company that’s momentarily on the clearance rack. Investors believe the stock is undervalued by the market and has solid fundamentals—like steady earnings, a strong balance sheet, and even dividends—but for whatever reason, Wall Street’s spotlight isn’t on it… yet.

Definition of Growth Stock A growth stock is a publicly traded company that is expected to grow at a rate significantly above the average for the overall market. These are the kinds of companies reinvesting their earnings back into the business instead of paying dividends, with the goal of expanding fast—think rocket fuel, not steady cruise.

Definition of Penny Stock A penny stock is typically a share of a small public company that trades for less than $5 per share. These stocks are often traded over-the-counter (OTC) through platforms like the OTC Bulletin Board or Pink Sheets, rather than on major exchanges like the NYSE or Nasdaq. Penny stocks are known for their low price, low trading volume, and high risk—but also the potential for high reward.

Definition of a Blue Chip Stock A blue chip stock refers to shares of a well-established, financially sound, and nationally recognized company with a history of reliable performance. Think of them as the all-star players in the stock market—companies that are leaders in their industries, pay regular dividends, and have a track record of weathering economic storms.

What is a Conglomerate? A conglomerate is a large corporation made up of several distinct and often unrelated businesses, all operating under one parent company. Unlike a company that sticks to one specific industry, a conglomerate spreads its interests across different sectors. Think of it as a financial “supergroup” — each division plays a different instrument, but they’re all under the same record label.

Definition of Holding Company A Holding Company is a business entity that exists primarily to own shares in other companies. It doesn’t usually make products or offer services itself—instead, it holds controlling interest in other businesses. Think of it like the parent who doesn’t run the lemonade stand but owns the stand… and the ice supplier… and the cup factory.

Definition of a Parent Company A parent company is a corporation that owns enough voting stock in another company to control its policies and management. The company it controls is called a subsidiary. Think of a parent company as the “boss” in the business family tree. While it may not run the day-to-day operations of its subsidiaries, it has the power to call the shots when it matters—like choosing leadership, approving budgets, or selling the business.

Definition of Subsidiary A subsidiary is a company that is controlled by another company, often referred to as the parent company. The parent usually owns more than 50% of the subsidiary’s voting stock, giving it control over business operations and decision-making. Put simply: a subsidiary is a business “child” owned by a business “parent.”

Definition of a Divestiture A divestiture is the sale, transfer, or disposal of a company asset, business unit, subsidiary, or investment. It’s the opposite of an acquisition. While companies often grow by acquiring more, a divestiture is about trimming the fat, refocusing, or raising cash. Think of it as a business shedding a layer it no longer needs—like a snake slipping out of old skin so it can grow.

Definition of Spin-off A spin-off is a type of corporate action where a company creates a new, independent business by separating part of its operations, assets, or divisions into a new entity. The shareholders of the parent company typically receive shares in the new company on a pro-rata basis.

In financial and business terms, an acquisition usually refers to one company buying another. When Company A acquires Company B, it means A now owns B — its assets, customers, operations, and all the headaches that come with it. But zoom out a bit: acquisitions aren’t just for Fortune 500 CEOs. Regular people like you and me can use this concept in powerful ways.

Definition: A merger is a financial and business transaction where two companies combine to form a single new entity. The goal? To grow bigger, faster, leaner—or all three. This isn’t one company “buying out” the other (though that sometimes is what’s really happening behind the scenes). In a true merger, it’s supposed to be a joining of equals—like a business marriage, minus the cake and awkward speeches.

Definition of Franchise At its core, a franchise is a business model where one party (the franchisor) grants another party (the franchisee) the rights to use its brand name, business processes, and proven systems to sell a product or service. In exchange, the franchisee typically pays an initial fee and ongoing royalties to the franchisor. It’s like buying a “business in a box.” You get a recognizable brand, a tried-and-true operating playbook, and often ongoing support...

Definition of a Cooperative (Co-op) A cooperative is a business or organization that’s owned and operated by the people who use its services. Instead of being run for the profit of outside shareholders, a co-op exists to benefit its members. Each member has a say in how the organization is run—one member, one vote—regardless of how much money they put in. Think of it as “We all pitch in. We all benefit.”

Definition of Limited Liability Company (LLC) A Limited Liability Company (LLC) is a type of business structure in the U.S. that blends the simplicity of a sole proprietorship or partnership with the protection of a corporation. Think of it as the middle ground—like ordering a fancy burger but skipping the extra calories from fries.

An S Corporation—or S corp for short—is a special type of corporation that allows business owners to enjoy the legal protections of a corporation while avoiding the dreaded “double taxation” that typically comes with one.

A corporation is a legal business entity that’s separate from its owners. It can own property, enter into contracts, sue or be sued, and even pay its own taxes—basically, it’s treated like its own “person” in the eyes of the law. Corporations are created when a group of individuals (or even just one person) files the proper paperwork with their state government, typically called “articles of incorporation.”

A partnership is like a business marriage—two or more people agree to join forces, pool resources, and share in both the profits and responsibilities of running a business. Unlike a corporation, a partnership is not a separate legal entity, which means the partners are personally liable for the business’s debts and obligations (unless it’s set up as a limited partnership).