Which describes a security that signifies ownership in a corporation and a claim on its assets and earnings?

• A. Due diligence
• B. Working capital
• C. Contingency fund
• D. Stock

Answer: (D)

Stock is a security that signifies ownership in a corporation and a claim on its assets and earnings. Owning stock means you own a piece of the company and can benefit from its profits through dividends and possible increases in the stock’s price. If the company is liquidated, stockholders have a residual claim on assets after all debts have been paid, meaning they are last in line but still own a portion of whatever remains. This combination of ownership rights and potential profit from earnings is what distinguishes stock from other terms like due diligence (an investigative process), working capital (a measure of short-term liquidity), or a contingency fund (a reserve for unforeseen costs).