In the latter case it appeals to the capitalist, and he, though not bearing enough available means of his own, undertakes the work with the knowledge that he can rely on the small investors, whose contributions he has before managed successfully.
STOCKHOLDERS
Or it may be that the manufacturing company does not ask the capitalist to assist, but itself goes to the small investor with a prospectus of the enterprise, and offers to sell stock in the concern at $50 or $100 a share, as the case may be.
This gives a chance to enjoy the profits, be they great or small; but with the chance for larger profits there comes the greater risk which must always be assumed in such cases.
Sometimes, when a company is starting, its stock may be put below par. This stock, in the event of success, may appreciate, as with some bank and other corporation stocks, many times above the par value.
When stocks sell in the open market for their face value, they are said to be at par.
KINDS OF STOCKS
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 getting according to his holdings.