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SS3: COMMERCE - 2ND TERM

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Meaning of Stock Exchange Securities

Security is a general technical term by the stock exchange for stocks, shares, debentures, and bonds.

1. Stock: It is defined as a collection of shares into a bundle or consolidated shares. The nominal value may be quoted per N100 but the owner may decide to sell or buy infractions.

2. Shares: It is the unit of the capital of a company allocated to individuals. The interest of shareholders in a company is measured by a sum of money that is invested in form of shares. It is offered to the public in various denominations such as 50 kobo, N1, N1.50 kobo, etc. shareholders bear the risks of ownership in the company because, in the event of liquidation of the business, they lose their shares, and if there is no profit in the course of business, they earn no dividend.

3. Debentures: This is a long-term loan taken by a public company from members of the public. Debenture holders are creditors of the company who are entitled to interest on the loans taken from them before profits are declared. In event of liquidation of the company, the fixed assets of the company are auctioned and the proceeds are used to settle the loans. It is also traded on the stock exchange.

4. Bonds: It is a certificate issued by the government or public company showing that one has lent money to the government or company at a specified interest per annum.

5. Gilt-edge securities: They are government stocks and local authority loans. Gilt-edge securities are interest-bearing securities that are considered relatively risk free. It has a high degree of safety for investors. It is long term security issued by the government.

6. Blue Chips: These are stocks and shares of notable companies that are public limited liability companies with sound profit profiles and stable prospectus. These stocks and shares are sought after by investors. Examples of such are; oil companies- Total, Mobil, etc. Conglomerate companies such as Nestle plc, Unilever plc, PZ, etc. are some of the companies their shares are considered as “blue chips”.

Evaluation Questions

  1. Explain the meaning of Stock Exchange
  2. State five functions of Stock Exchange
  3. Describe organizational Set-up and procedures at the Stock Exchange
  4. Mention five of the Securities traded in the Capital Market

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