What is Capital Stock: Definition, Example, Preferred vs. Common Stock

Capital stock is the maximum number of common and preferred shares a company is authorized to issue to raise capital. Issuing capital stock allows a company to raise money without incurring debt, but it also means giving up some control and diluting the value of outstanding shares. Treasury stock, preferred stock, and common stock provide additional details on the types of shares a firm can authorize. Valuing capital stock is based on the par value and additional paid-in capital. There are advantages and disadvantages to issuing capital stock, including cheaper financing and loss of control.
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