For the purpose of raising capital, a corporation issues to the investors a certain amount of certificates with specific share denominations or face values, so as to represent a proof of investment in the corporation. In other words, the capital of the corporation is divided into certain number of shares, with each share representing a certain fixed value, and the stock certificates are evidencing documents used to represent the shareholder's ownership entitlement to the corporation. Stocks can be divided into two types, (1) common stocks and (2) preferred stocks.

When a corporation issues only one type of stocks, such stocks are known as common stocks; whereas if more than two types of stocks are being issued, some stocks would be entitled to certain priority privileges or bound by certain restrictions, such stocks are know as preferred stocks.