What does common stock represent in a corporation?

Common stock represents a unit of ownership in a corporation, which means that each share of common stock gives the shareholder a claim on a portion of the corporation's assets and earnings. By owning common stock, shareholders have voting rights in certain corporate matters, such as electing the board of directors and approving corporate policies. This ownership stake can appreciate in value as the company grows, and shareholders may also receive dividends, although these are not guaranteed.

In contrast to other types of securities, common stock does not involve lending money to the corporation (which would be indicated in options related to loans or debt), nor is it a type of corporate debt such as bonds. Additionally, it is not a government-issued security, which refers to instruments like treasury bonds. Therefore, identifying common stock as a unit of ownership accurately captures its essence and the rights it conveys to shareholders within the corporate structure.