Skip to main content

Ch.1 Nature and Purpose of Business [BSt]

Chapter 1. 
Nature and Purpose of Business
In every society people undertake various activities to satisfy their needs.
Activities:
I ) Economic 
        II ) Non-Economic

Q. What is economic activities?
Ans. Economic activities are those activity by which we can earn our livelihood.
Ex:- Teacher teaching in school.

Q. What are non-economic activity?
Ans. Those activities which are performed out of love, sympathy, sentiments, patriotism,etc.
Ex:- Teacher teaching his kid,
        Charity to poor people.

Q. What are the characteristic of Business?
Ans.1) An economic activity:
Business is considered to be an economic activity because it is undertaken with the object of earning money or livelihood.

       2) Production or procurement of goods and services: 
This goods must be either produced or procured by business enterprises. 

       3) Sale or exchange of goods and services for the satisfaction of human needs: 
Directly or indirectly, business involves transfer or exchange of goods and services for value. 

       4) Dealings in goods and services on a regular basis: 
Dealings in goods or services on a regular basis. One single transaction of sale or purchase, therefore, does not constitute business.

       5) Profit earning: 
Main purpose of business is to earn income by way of profit. 

       6)  Element of risk: 
Risk is caused by some unfavorable or undesirable event.
Ex:- Change in consumer taste or fire, theft, accidents, natural calamities,etc.

CLASSIFICATION OF BUSINESS ACTIVITIES:
Business Activities may be classified into:
                  Business
1. Industry 2. Commerce
i. Primary
ii. Secondary
iii. Territory

Q. What are Primary Industry? Classify them.
Ans. Primary industries: These include all those activities, which are connected with the extraction and production of natural resources and reproduction and development of living organisms, plants etc.

Classification:-
      Primary Industry
i. Extractive ii. Genetic
(i) Extractive industries: These industries extract or draw out products from natural sources.
Ex:- farming, mining, lumbering, hunting and fishing operations. 

(ii) Genetic industries: These industries remain engaged in breeding plants and animals for their use in further reproduction.
Ex:- cattle breeding farms, poultry farms, and fish hatchery.

Q. What is Secondary Industry?
Ans. Secondary industries: These are concerned with using the materials, which have already been extracted at the primary stage.

Classification:-
      Secondary Industry
i. Manufacturing ii. Construction

(i) Manufacturing industries: These industries are engaged in producing goods through processing of raw materials.
*Analytical industry (oil refinery)
* Synthetic industry (cement, paint, etc.)
*Processing industry (sugar, paper, cloths, etc.)
*Assembling industry (television, car, computer, etc.)

(ii) Construction industries: These industries are involved in the construction of buildings, dams, bridges, roads as well as tunnels and canals, etc.

Q. What is Tertiary Industry?
Ans. Tertiary industries: These are concerned with providing support services to primary and secondary industries as well as activities relating to trade. 
Ex:- transport, banking, insurance, warehousing, communication, packaging and advertising.

Q. What are the Objectives of Business?
Ans. Objectives of Business can be classified as:-
Economic Objective:
(a) Profit Earning: Every business must earn a reasonable profit which is so important for its survival and growth.

(b) Innovation: Innovation is the introduction of new ideas or methods in the way something is done or made.

(c) Survival and Growth: Survival and Growth helps business to operate in long run.

Social Objectives:
(a) To provide employment.
(b) To protect and care for environment.
(c) To care for needy and poor section of society of people. (Orphanage, Old age people, etc)

Q. What do you understand by commerce? How can it be classified?
Ans. Commerce provides the necessary link between producers and consumers. It embraces all those activities, which are necessary for maintaining a free flow of goods and services.
Classification:-
   Commerce
i. Trade ii. Auxiliaries to Trade

(i) Trade: It refers to sale, transfer or exchange of goods. It helps in making the goods produced available to ultimate consumers or users.
Trade may be classified into two broad categories — internal and external.
[a] Internal Trade: Buying and selling of goods and services within the geographical boundaries of a country is known as Internal Trade.
[b] External Trade: Exchange of goods and services between persons or organisations operating in two or more countries.

(ii) Auxiliaries to Trade:
Activities which are meant for assisting trade are known as auxiliaries to trade. These activities are generally, referred as services.

[a] Transport and Communication:
Transport facilitates movement of raw material to the place of production and the finished products from factories to the place of consumption. 
Communication facilities so that producers, traders and consumers may exchange information with one another.

[b] Banking and Finance: Necessary funds can be obtained by businessmen from a bank. 

[c] Insurance: Insurance provides protection in all factors like fire, theft and other risks.

[d] Warehousing: Warehousing helps business firms to overcome the problem of storage and facilitates the availability of goods when needed. 

[e]  Advertising: Helps in promoting the sale of products.

BUSINESS RISK
The term ‘business risks’ refers to the possibility of inadequate profits or even losses due to uncertainties or unexpected events. 

 Types of risk: speculative and pure risk. 
i) Speculative risks: Speculative risks involve both the possibility of gain as well as the possibility of loss.
ii) Pure risks: Pure risks involve only the possibility of loss or no loss. 

NATURE OF BUSINESS RISKS
(i) Business risks arise due to uncertainties: 
Uncertainty refers to the lack of knowledge about what is going to happen in the future. which create risks for business. 
(ii) Risk is an essential part of every business: 
No business can avoid risk, Risk can be minimized but cannot be eliminated. 
(iii) Degree of risk depends mainly upon the nature and size of business: 
A large-scale business has a higher risk than what a small scale has. 
(iv) Profit is the reward for risk taking: 
No risk, no gain is an age-old principle, which applies to all types of business. Profit is thus the reward for risk taking.


 Causes of Business Risks
(i) Natural causes: Human beings have little control over natural calamities like flood, earthquake, lightning, heavy rains, famine, etc.

(ii) Human causes: Human causes include such unexpected events like dishonesty, carelessness or negligence of employees, stoppage of work due to
power failure, strikes, riots, management inefficiency, etc. 

(iii) Economic causes: These include uncertainties relating to demand for goods, competition, price, collection of dues from customers, change of technology or method of production, etc.

Q. What are the factors to be considered before Starting a Business?
Ans. Some of the basic factors to be considered are:-
        (i) Selection of line of business: 
The first thing to be decided by any entrepreneur of a new business is the nature and type of business (Trading or manufacturing). Businessman obviously like to enter that branch of industry, which has the possibility of greater amount of profits.

       (ii) Size of the firm: 
Another important decision to be taken at the start of the business. Large scale or small scale business to be started.

       (iii) Choice of form of ownership: 
Businessman will decide the form of business organisation to start (For example -  sale proprietorship, partnership, or a joint stock company). 

       (iv) Location of business enterprise: 
An important factor to be considered at the start of the business is the place where the enterprise will be located. Availability of raw materials, reach to customer, etc. should be considered.
  
       (v) Financing: 
Proper financial planning must be done to determine 
(a) the requirement of capital, 
(b) source from which capital will be raised and 
(c) the best ways of utilizing the capital 
      
       (vi) Physical facilities: 
Availability of physical facilities including machines and equipment, building and supportive services is a very important. 
      
       (vii) Plant layout: 
The entrepreneur should draw a layout plan.
       
       (viii) Competent and committed worked force. 

        (ix) Tax planning.

         (x) Launching the enterprise



-------------------------------------------------*****************-----------------------------------------------                                                                           The End

Comments

  1. Your very own commitment to getting the message throughout came to be rather powerful and have consistently enabled employees just like me to arrive at their desired goals.audit firms in dubai

    ReplyDelete
  2. This notes is a blessing for all the Commerce students who opted Business studies
    as a subject. I strongly recommend to all the concerned students to go through the notes.
    Home Tutors in Lucknow | Home Tuition Service

    ReplyDelete
  3. Really a very fine way to express and looking a very pleasant article with full of healthy information. I am definitely going to tell in my class about this platform and the information shared here. Very well written. sme borrowing

    ReplyDelete
  4. Yes they are providing the Accounting Software in Lahore Pakistan | Karachi and Islamabad and it also gives demo for accounting software

    ReplyDelete
  5. This is more than a fact for me. Thanks for sharing such great info.

    Visit my website if you are QuickBooks user:

    QuickBooks Support Phone Number

    QuickBooks Support

    QuickBooks Support

    QuickBooks Customer Service

    ReplyDelete

Post a Comment

Popular posts from this blog

#Earn Money Online| Zero Investment Business Passive Income| Know How Th...

Visit Youtube Channel : https://www.youtube.com/channel/UC3a6HjGftnzGyNhw-VMKY4w #Earn Money Online | Zero Investment Business Passive Income | Know How This is Earning Out of You.. Open Free Demat Account on Upstox: https://upstox.com/open-account/?f=KB2497 Google form Link for verification & Payment :   https://forms.gle/kVqVfPbWXu7Ak8hZ7 Fill this form to verify and get the payment. In This you will get to know how you can #EarnMoneyOnline with #Upstox with Zero Investment just by referring to your friends and known one. And know this man "Puskar Raj is making money out of you" Download from the above link and get 300-350 per Account on your own Registration.  I will be contacting everyone who will download from the above link as well as I will also offer them more Work from home jobs by which anyone can make around 10-15K per month easily. In This you will get to know how you can #EarnMoneyOnline with #Upstox with Zero Investment just by referring to your friends ...

Transportation Technique (Assignment Problem)

 The transportation technique or method is the study of efficient transportation routes i.e., how efficiently the product from different source of productions is transported to the different destinations, such as the total transportation cost is minimum. Practical Question with Answer:  Initial basic feasible solution of a transportation problem Row minima method Column minima method North west corner rule South East Corner rule Matrix minima method (Lowest cost entry method) Vogel’s approximation method Optimality Test / Square Evaluation of Empty Cell 1. Stepping Stone Method : Here all the square evaluation empty cell give non negative result. 2. MODI (Modified Distribution Method) or U.V. Method : Here all the square evaluation of empty cell gives non positive result.

{COVID 19} CORONA VIRUS IN INDIA | A GENERAL POINT OF VIEW FROM A RESPON...

https://youtu.be/QlXevLS6cM0:-           https://youtu.be/QlXevLS6cM0