nature and purpose of business.

1. Human Activities
In every society people undertake
various activities to satisfy their needs.
These activities can b broadly be
classified in two groups:
ECONOMIC ACTIVITIES
 NON ECONOMIC ACTIVITIES

2. ECONOMIC ACTIVITY
 Economic activities are those by which
we can earn our livelihood.
OR
 Keeping yourself engaged to earn
something in return is economic
activity.
 e.g. doctor, teacher, driver, sweeper or
clerk are all engaged in economic
activities.

3. NON ECONOMIC ACTIVITY
 Activities which do not have any economic
motive and are performed with a feeling of
love, sympathy, humanity and patriotism
are known as non-economic activities.
 e.g. playing, dancing, giving donation, a
housewife cooking food for family, or a boy
helping an old man cross the road etc.

4. TYPES OF ECONOMIC ACTIVITIES
 Economic activities may be further divided into three
categories:
1. Business
2. Profession
3. Employment

5. Business
 The term Business is derived from the word ‘busy’.
Thus, business means being busy.
 However, in specific sense, business refers to an
occupation in which people regularly engage
themselves with a view to earn profit.
 Business involves production or purchase or exchange
of goods and services to satisfy the needs of people
with aim to earn profit.
 The persons who are engaged in business are called
entrepreneurs.

6. PROFESSION
 Profession refers to the activity which requires special
knowledge and skills to be applied by an individual in
his work to earn a living. E.g. doctor, lawyer, teacher,
nurse.etc.
EMPLOYMENT
Employmentrefers to an activity in which a person works
regularly for another for a fixed remuneration. E.g.
People who work in banks, insurance companies, or
government departments, as managers, assistants,
clerks, peons, or security guards.

7. CHARACTERISTICSOF BUSINESS
ACTIVITIES
1. An economic activity.
2. Production or procurement of goods and
services.
3. Sale or exchange of goods and services for the
satisfaction of human needs.
4. Dealing in goods and services on regular basis.
5. Profit earning.
6. Uncertainty of return.
7. Element of risk.

8. COMPARISON OF BUSINESS,
PROFSSION AND EMPLOYMENT
1. Mode ofestablishment:
 Business is established when the entrepreneur
decides.
 Profession is started after getting the certificate
of practice from the professional body.
 Employment begins after getting the
appointment letter from the employer.

9. 2. Nature ofwork:
 Business includes buying and selling of
goods and services.
Profession involves rendering personalized
services of expert nature.
Employment includes performing the work
as per the service contract.

10. 3. Qualification:
 No minimum qualification is required for
business.
A professional degree in a specific field is
required for profession.
 An employee needs the qualification and
training as prescribed by the employer.

11. 4. Return of reward:
 Business gets the return in the form of
profit.
Professionals charges fees for their services.
 Employees get the salary or wages in return
for their work.

12. 5. Capital investment:
 Business needs investment as per its size
and nature.
 Only initial investment is required in case
of profession.
 No capital investment is needed for
employment.

13. 6. Risk:
 In business, profits are uncertain and
irregular; so risk is present.
 Professionals face less risk ; as the fee
charged is generally regular and certain.
 No risk is there in employment; as they get
a fixed and regular pay.

14. 7.Code of conduct
 No code of conduct is prescribed in
business.
 Professional code of conduct is to be
followed.
Norms of behavior laid down by the
employer are to be followed.

15. OBJECTIVES OF BUSINESS
 An objective is the starting point of business.
 It refers to the aim because of which a business unit
is brought in to existence.
Objectives of business:
1. Market standing
2. Innovation
3. Productivity
4. Physicaland financialresources

16. 5. Earning profit
6.Manager performance and development
7. Workers performance and attitude
8. Socialresponsibility

17. FACTORS TO BE CONSIDERED WHILE
STARTING A BUSINESS UNIT
1. Selection of line of business
2. Size of the firm
3. Choice of form of ownership
4. Location of business enterprise
5. Availability of finance
6. Physical facilities
7. Plant layout
8. Competent and committed work force
9. Tax planning
10. Launching of enterprise

18. BUSINESS RISK
 The term business risk refers to the possibility of
inadequate profits or even losses due to uncertainties
or unexpected events.
 Busniess enterprises constantly face two types of risks:
specultive risk and pure.
 Speculative risk– involves both the possibility of
gain as well as the possibility of loss.Examples- change
in demand and supply, chages in fasion and taste of
consumers etc.
 Pure risk involve only the possibility of loss or no
loss. Example- the chance of fire, theft or strike.

19. NATURE OF BUSINESS RISK
1. Business riskarise due to uncertainties.
2. Risk is the essentialpart of business.
3. Degreeof risk depends uponthe nature and size
of business.
4. Profit is the rewardfor risk taking.

20. Causes of business risks
i. Natural causes–naturalcalamitieslikeflood, earthquake,lightning,
heavyrains etc.
ii. Humancauses–dishonesty,carelessnessor negligenceof
employees,stoppageofworkduetopowerfailure,strikes,
managementefficiency.
iii. Economic causes–uncertaintiesrelatingtodemandforgoods,
competitionprices,collectionofduesfromcustomers,changeof
technologyor methodofproduction.
iv. Othercauses–politicaldisturbance,mechanicalfailureetc.