SS1 Commerce Lesson Note on Commodity Exchange

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COMMODITY EXCHANGE:

Commodities –tangible things, such as products are things we can see. Commodity exchange is an exchange where various commodities and derivates products are traded. Stocks are intangible things (cannot be seen) that are traded on the Stock Exchange.

Differences between commodities and stocks.

COMMODIITIES	STOCKS
a.      Commodities entail immediate consumption of products for domestic and industrial purposes.	Stocks entail investment in a company.
b.     Commodities are tangible in nature which is consumed.	Stocks are intangible in nature
c.      Commodities involve passing of ownership and titles of goods between the seller and the buyers.	Stocks allow taking ownership in a company
d.     Traders are involved in selling and buying of commodities.	Brokers are involved in buying and selling of stocks.
e.      Commodities are traded in commodity exchange market.	Stocks are traded in stock exchange market.
f.      Commodities often came into existence through production process.	Stocks came into existence through issuing processes.
g.     The return on tradable commodities is known as profit.	The return on stocks is known as dividend.

SIMILARITIES BETWEEN COMMODITIES AND STOCKS.

1. They can be bought and traded
2. They require large sum of money to trade with.
3. The profits/dividends from trading on commodities and stocks are usually very high

EVALUATION:

1. What is tangible and intangible commodity?
2. State five differences between commodities and stocks.
3. State the similarities between commodities and stocks.

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