SS3 First Term Commerce Lesson Note – Stock Exchange

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WEEK 8

CLASS: SSS3

TOPIC: STOCK EXCHANGE

CONTENT:

1. Meaning, function and importance
2. Organizational set up and transactions at the stock exchange
3. Stock exchange securities (meaning and types)
4. Capital market: Meaning and method of raising funds

SUB-TOPIC 1: MEANING AND IMPORTANCE OF STOCK EXCHANGE

Stock exchange is a specialized market for buying and selling of securities. These securities are shares and stock which represent ownership interests in businesses, debentures and government bonds. This is a market where those who are interested in purchase of securities are brought into contact with the sellers.

IMPORTANCE OF STOCK EXCHANGE

1. It provides yardstick for measuring performance of companies
2. An avenue for raising capital: Companies and governments raise capital through stock exchange
3. Employment Opportunities: It provides employment opportunities for brokers, jobbers, clerks etc.
4. Provides information to investors: Foreign investors can obtain necessary information about the investment situation of a country
5. Facilitates transfer of investments
6. It is a market for investment: Stock exchange provides avenue for people to invest in any sector of the economy.
7. Leads to increase in the standard of living: Investment opportunities leads to more income which affects consumption thereby increasing the standard of living of the people of the country.

FUNCTIONS OF THE STOCK EXCHANGE

1. Fund mobilization
2. Sales of securities
3. Financial markets for investment
4. Provides avenue for government to raise fund
5. Provision of professional advice
6. Provision of rules and regulations
7. Encourages companies to be more efficient
8. Sale of securities etc

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