Raw Materials

AAA

DEFINITION of 'Raw Materials'

A material or substance used in the primary production or manufacturing of a good. Raw materials are often natural resources such as oil, iron and wood. Before being used in the manufacturing process raw materials often are altered to be used in different processes. Raw materials are often referred to as commodities, which are bought and sold on commodities exchanges around the world.

INVESTOPEDIA EXPLAINS 'Raw Materials'

Raw materials are sold in what is called the factor market. This is because raw materials are factors of production along with labor and capital. Raw materials are so important to the production process that the success of a country's economy can be determined by the amount of natural resources the country has within its own borders. A country that has abundant natural resources does not need to import as many raw materials, and has an opportunity to export the materials to other countries.

RELATED TERMS
  1. Commodity

    1. A basic good used in commerce that is interchangeable with ...
  2. Chicago Board Of Trade - CBOT

    A commodity exchange established in 1848 that today trades in ...
  3. Generally Accepted Accounting Principles ...

    The common set of accounting principles, standards and procedures ...
  4. New York Board Of Trade - NYBOT

    A commodities exchange in New York that trades futures and options ...
  5. Inventory

    The raw materials, work-in-process goods and completely finished ...
  6. Cost Of Goods Sold - COGS

    The direct costs attributable to the production of the goods ...
RELATED FAQS
  1. What are some examples of times when I would need a letter of credit?

    A letter of credit, sometimes referred to as a documentary credit, acts as a promissory note from a financial institution, ... Read Full Answer >>
  2. Why would a multinational corporation conduct a vertical foreign direct investment?

    In many cases, multinational corporations conduct horizontal foreign direct investment (FDI) activities in order to expand ... Read Full Answer >>
Related Articles
  1. Forex Education

    The Impact Of Currency Conversions

    Will a rising or falling dollar hurt you or your company? In this article we explore the impact of currency converisons on consumers, comanies, and countries.
  2. Active Trading

    Commodities: The Portfolio Hedge

    These diverse asset classes can provide downside protection and upside potential. Find out how to use them.
  3. Forex Education

    Commodity Prices And Currency Movements

    Find out which currencies are most affected by fluctuations in gold and oil prices, and improve your trading.
  4. Mutual Funds & ETFs

    Mine For Profits With Natural Resource Sector Funds

    These funds allow everyday investors to get in on the action in this promising sector.
  5. Insurance

    Futures Fundamentals

    For those who are new to futures but want a solid understanding of them, this tutorial explains what futures contracts are, how they work and why investors use them.
  6. Investing

    What Has Been Groupon’s Growth Strategy?

    Groupon established a strategy with efforts to become a broader force in the e-commerce world and to expand more strongly into international markets.
  7. Economics

    The Impact Of Ending The US Embargo On Cuba

    Many argue that ending the US embargo on Cuba will not only make US consumers happy, but also help the US economy and bring more freedoms to Cuba.
  8. Economics

    This Is A Small Country With Huge Potential to Grow

    Trinidad and Tobago's increased revenue and economic success have been primarily generated by its energy sector, but it still might be best to diversify.
  9. Investing

    Cost and Freight (CFR)

    Cost and freight, called CFR, is a trade term between a buyer and seller. CFR requires the seller to arrange for the transport of goods by sea to the required port. It also requires the seller ...
  10. Economics

    Afraid Of A New Financial Crisis?

    It may be time for the U.S. to adopt a model for financial companies that better deters risky financial behavior.

You May Also Like

Hot Definitions
  1. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  2. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  3. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  4. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  5. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  6. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
Trading Center