It may be, however, that the manufacturing company does not ask the individual capitalist for assistance, but instead goes itself to small investors with a business prospectus and offers to sell stock in the company, at a certain amount per "share." This gives others a chance to enjoy the profits, be they great or small; however, the larger the chance of profits, the greater the risk that the investors must assume to achieve them.
When stocks sell in the open market for their face value, they are said to be at par. Sometimes, though, when a company is getting started, it may put its stock below par. This stock, in the event of success, may appreciate many times above the par value.
Most companies, organized on a stock basis, issue stocks of two kinds -- one is known as "common" the other as "preferred." As the name implies, preferred stock (its rate of interest is always fixed) is entitled to be paid out of the net dividends first. Whatever is left after paying the preferred stock interest is divided up equally among the shares of common stock, each individual or group receiving an amount according to his holdings.
Sometimes the dividends on common stock are far greater than those on the preferred. The preferred stock dividends are regarded as a fixed charge, but there can be no limit as to the payments on the common stock, if the funds are available after the initial payments.
The stocks of railroads, factories, banks, and other enterprises may be good forms of investment, and for this they are often held for long periods by investors for revenue.
