Legal Definitions - equity stock

Definition: Equity stock is a type of stock that gives the holder the right to participate in a company's management and share in its profits. It represents ownership in a corporation and is sold to raise capital for the company.

Examples:Common stock is a type of equity stock that entitles the holder to vote on corporate matters and receive dividends after other claims have been paid. Preferred stock is another type of equity stock that gives its holder a preferential claim to dividends and assets upon liquidation, but usually does not carry voting rights.

Explanation: Equity stock represents ownership in a company and gives the holder certain rights and privileges. Common stockholders have the right to vote on important corporate matters, such as the election of directors, and receive dividends after preferred shareholders have been paid. Preferred stockholders have a preferential claim to dividends and assets upon liquidation, but usually do not have voting rights. Both types of equity stock represent a share in the company's profits and can increase in value if the company performs well.