The word commodity was first noticed in the English language in the 15th century. Its origins are French and come from the word “commodite” meaning to benefit or to profit from. In modern times, a commodity is a good or tangible product where this is a demand in place. The good is supplied, however, without qualitative differentiation. It can be interchanged with another product of the same type. One example of this is petroleum. Petroleum is petroleum and is universally accepted as such. Its price will fluctuate daily only because of changes in global supply and demand. These goods can be bought or sold through futures contracts. Some very common commodities are iron ore, crude oil, coal, ethanol, salt, sugar, coffee beans, soybeans, aluminum, copper, rice wheat, gold, silver and platinum.
When goods or services lose differentiation this is called commoditization. This often happens when the intellectual capital that is necessary has dwindled and the good or service cannot be produced as efficiently any longer. Examples of this would be pharmaceutical drugs. These drugs are first rolled out and offer their companies premium margins. But what usually happens over a period of time (often after patent runs out) these same drugs become commodities and are offered at a much lower price point.
Risk is one of the reasons that exchange trading of agricultural commodities began. For example, the farmer will risk the cost of producing and farming his product to get ready for market at sometime in the future because he does not know what the selling price will be.
Cost of goods sold or COGS includes the cost of the production or manufacturing of goods and products for a business. This amount would include the cost of the raw materials along with all of the costs of the labor that is associated with making the products. Costs that are excluded are indirect expenses like distribution costs and costs for the sales force. You will find the cost of goods sold number on the income statement. The formula for calculating the cost of goods sold is equal to the Beginning Merchandise Inventory plus the Net Purchases of Merchandise and the subtracting the Ending Merchandise Inventory. This will give you the COGS figure. In addition, this number can be deducted from the revenue in order the company’s gross margin.
Since COGS refers to the costs that are related to the creation of the products that company makes, therefore the costs that are included are those that are directly affiliated with the making of those products. Let’s take an example. If you have a hat making business then the COGS would include all of the costs that would be associated with the making of the hats. These costs would include fabric, thread, labor, etc. The cost of shipping the hats to retailers are not included in COGS, however.
The COGS is also useful in determining other key figures. You can calculate a company’s net income by subtracting the cost of goods sold in addition with the indirect expenses from the sales revenue.
Common stock is a type of corporate ownership that gives those that own the stock a portion of equity or ownership in the company. The reason it is called “common stock” is to set it apart from “preferred stock”. Preferred stock is higher ranking stock than its neighbor, common stock.
If a company were to go bankrupt, the common stock investors would receive their portion of the funds distributed after those holding preferred stock. They will also receive funds after bondholders and creditors. It is also important to note, however, that shares in common stock perform, on average, better than preferred shares or even bonds over a period of time.
Common stock also usually carries voting shares. Typically, shareholders that own common stock will receive one vote per share. This is not always the case, however. And, the number of votes a shareholder has is not always proportionate to the number of shares held. Shareholders of common stock have the ability to influence the company in which they hold shares through voting on different corporate objectives and policy plans. They even have a part in helping to elect the company’s board of directors. The board of directors is the group that represents the corporation and the owners of the corporation. The board of directors oversees and makes major decisions related to the company, so shareholders have a say in who oversees the company. Shareholders of common stock also can receive voting rights that are related to company matters such as stock splits or other company plans.
The cost of sales is an important component of many businesses. It involves determining the cost of expenses necessary for the manufacturing of goods. Specifically, it refers to the cost of raw materials related to the manufacturing of goods that are sold by the company. It is also sometimes referred to as cost of goods sold or COGS. The number associated with the cost of sales is often used to determine the overall costs of creating and manufacturing products that are sold by the company.
If you want to calculate the total of the actual cost of sales, the numbers that you will need in order to calculate this will be found on the company’s income statement. The cost of raw materials will not be the only factor in the equation. However, not every company will use the same elements when calculating cost of sales. There are several types of expenses to consider when calculating this figure.
Not only will you need to account for the cost of raw materials, the cost of the labor that will be associated with making those raw materials into products need to also be factored in. Labor costs can include a variety of things such as wages, tips, the cost of benefits and health insurance. Accrued vacation time can even be included. Employees that are directly involved in the making of the product can be included. This may be assembly line workers and in some instances their supervisors. All of these things contribute to the cost of sale.
A fiduciary is a legal relationship between two or more parties. The relationship is a legal but also ethical relationship including a trust between the two parties. The most common parties in this relationship is a fiduciary or trustee and a principal or beneficiary. The fiduciary relationship is one of the utmost trust and confidence. In fact, the word fiduciary comes from the Latin word fides which means faith and the Latin word fiducia which means trust.
For example, if a company, corporate trust or the trust department of a bank holds a fiduciary relation or acts as a fiduciary to another then the fiduciary will act in good faith on behalf of the person or persons to who the fiduciary holds the trust. This relationship is the highest standard of care. It is extremely important that the fiduciary always act in the best interests of the party to whom he or she has been entrusted. Extreme loyalty is expected and personal interests and personal gain is never to be sought unless it expressed consent has been given by the principal.
Corporate directors may be held to a fiduciary title that has similar aspects to that of a trustee. For example, a bank director may become a trustee for the depositors. This position is a fiduciary duty. Sometimes persons in these sensitive positions will also set up a blind trust which places all of his or her own personal financial matters in the hands of a fiduciary in order to protect himself or herself from a conflict of interest.
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