Which instrument represents ownership in a corporation and a claim on assets and earnings?

• A. Conditions
• B. Stock
• C. Capacity
• D. Collateral

Answer: (B)

Stock is the instrument that shows you own a piece of a company. When you buy stock, you become a shareholder with an ownership stake proportional to your shares. This ownership entitles you to a share of the company’s earnings, typically through dividends, and a claim on the company’s assets after creditors are paid if the company is liquidated. The value of stock also reflects the company’s performance, offering the potential for capital gains or losses.

Collateral, by contrast, is property pledged to a lender to secure a loan and is not ownership in the company. Conditions refer to terms of a contract, and capacity is the legal ability to enter into a contract.