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Form and purpose of the business
1. Form and Purpose of the Business Chapter – 1 ATTITUDE TUTORIALS,AHMEDABAD-15
2. Economic activities Any activity carried for economic gain is known as economic activity E.g. A person working in the bank. Services provided by the doctors ATTITUDE TUTORIALS,AHMEDABAD-15
3. Non – Economic Activities E.g. – Volunteers working in relief camps It is generally carried out for affection, attachment, recognition and status The activities in which the purpose are not for earning but for social services are known as non – economic activities. ATTITUDE TUTORIALS,AHMEDABAD-15
5. Business Meaning :- Any activity performed with the purpose of profit is called business. Concept :- Business is known by profit motive. E.g. :- A grain trader gives grain to beggar and he give to customers. Which is a business? The result may be profit or loss but still the activity is known as business. ATTITUDE TUTORIALS,AHMEDABAD-15
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7. Risk like fire, accidents, theft, robberies and natural calamities like earthquake, storms…..
10. High return when circumstances are favorable.ATTITUDE TUTORIALS,AHMEDABAD-15
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12. Utility is created by changing form of the commodity i.e. – Place utility by sending goods from one place to other. Time utility by storing at a time and selling at other time.ATTITUDE TUTORIALS,AHMEDABAD-15
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14. Profit is a life of a business. In absence of profit the closure of business is imminent.ATTITUDE TUTORIALS,AHMEDABAD-15
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16. The shops, factories, hand carts, kiosks, company, etc. regularly do activities continuously. That is called as business.
17. But if we sell our television set with profit; cannot be termed as business. If any predetermined work is undertaken with the purpose of profit; then it is also termed as business. e.g., If seven persons unite together by creating joint venture and construct multi Storey building, it is called as business.ATTITUDE TUTORIALS,AHMEDABAD-15
18. Business 5) Economic activity : Business is one type of economic activity. As it is economic activity, it is undertaken with a purpose to earn financial returns. In business such financial return is in the form of profit. ATTITUDE TUTORIALS,AHMEDABAD-15
21. Business (A) Primary objective of business : The main primary objective of business is to get (earn) profit. To get (earn) profit :Business is undertaken with the objective of making profit. Profit is the test of efficiency of business. The stability of business can only be measured on the bases of profit. The concept of profit maximization is old. Now it is accepted that reasonable profit has to be earned not maximum profit. Because of concept of reasonable profit, business units keep reasonable price of products and services. As a result the satisfied customer class is created. Business unit can survive for longer and can effectively face the competition. It can earn respect and prestige among public at large. It can be said that profit is the life line of business. ATTITUDE TUTORIALS,AHMEDABAD-15
22. Business (B) Subsidiary objectives of business 1. To maintain social responsibility : Business is connected with different classes of the society. Hence, business unit has to run business activity by remaining responsible towards people residing in the society, employees, members or employers, creditors government and customers. Hence, it is important that everybody's interest is maintained properly. The unit which does not maintain such responsibility cannot survive in the society. The objective of keeping interest of various classes of the society and implement different business activities is called objective of social responsibility. Hence, various business units try to attain proper balance between profit objective and objective of social responsibility. ATTITUDE TUTORIALS,AHMEDABAD-15
23. Business 2. To provide employment : Because of increase in population unemployment has increased a lot. By establishing and developing business this problem can be resolved. e.g., The employees of National Textile Corporation Limited takes charge of sick textile mills so as to avoid unemployment. The KhadiGramodhyog Commission; encourages cottage industry and small scale industries to promote employment generation. The government provides incentives for economically backward areas to generate employment opportunities. Some industrialists start industries in their native place to repay their indebtedness with an objective to provide employment to the local people. ATTITUDE TUTORIALS,AHMEDABAD-15
24. Business 3. Maximization of wealth : The wealth of business enterprise is increased step by step. It is called maximization of wealth. This is a long term objective. Under contingency like recession or emergency policy of keeping wealth and prestige intact and progress in future are to be adopted even at the cost of profit. ATTITUDE TUTORIALS,AHMEDABAD-15
25. Business 4. To provide goods or services at reasonable rate : Because of Government control, consumer alertness, business competition; business enterprises have started adopting consumer oriented approach. They have adopted objective of providing goods and services of proper quality at reasonable price. ATTITUDE TUTORIALS,AHMEDABAD-15
26. Business 5. To maintain prestige : Certain business unit has the objective to develop their special prestige. The business unit with its name, trade-mark or patent, high quality and honest transactions develop their special image/prestige in the society. Many times, to create such prestige the profit motive are sacrificed. Their intention is to earn reputation with the passage of time and to maintain it. Such situation of sacrificing profit however cannot continue for long. ATTITUDE TUTORIALS,AHMEDABAD-15
27. Business Business 6. Other objectives : Over and above the objectives discussed above there can also be other objectives of business unit. It is like economic up liftment of members To provide remuneration and other facilities to employees, To contribute in national growth, To face the competition, To develop new products, to develop business, To increase credit in own field and attain leadership, To dominate the market ATTITUDE TUTORIALS,AHMEDABAD-15
29. Nature and causes of Business risks 1) Natural risk Any business can completely destroyed even though it may be flourishing. Any calamities can hinder the progress of the business. Loss occurred due to such risk is unavoidable. 2) Man- Made risk Many risk such as fire, theft, riot, war, boom-slump, change in fashion of certain pattern. Financial risk is inherent in business with the risk in tax. ATTITUDE TUTORIALS,AHMEDABAD-15
30. Causes of business risks Uncertainty of demand: Sometimes demand of a particular product is increasing whereas sometimes it is decreasing, e.g. at the event of World-Cup cricket-matches, the demand for television sets suddenly increases. Changes in technology: If machines, equipment or computers having more inherent services are invented, the old ones become obsolete, e.g. old punch cards have become obsolete due to the introduction of computers., There is risk of competition: Publicity or other expenses are increasing due to competition. Resultantly profit decreases. Due to the entry of other competing firms, it becomes necessary to decrease price. Financial risks are to be faced: Due to boom, slump, decrease or increase in the rate of interest, increase in expenses, increase in salary, due to risk in dearness allowance, increase in electricity expenditure, high expenditure due to increase in tax by the government on certain products etc….. ATTITUDE TUTORIALS,AHMEDABAD-15
31. Meaning of profit & its role in business. OR Describe positive & negative role of profit in business. OR Write a note on profit. OR Profit is oxygen of a Business OR Profit is lifeline or boon of a business Profit is a motivating force of business. Profit is a means of livelihood for businessman. Profit is index to measure the efficiency of business activities. It is monetary benefit from sales & purchase of goods & services. Profit occurs when goods & services are sold at higher price than purchase price. ATTITUDE TUTORIALS,AHMEDABAD-15
32. Describe positive & negative role of profit in business. Positive role of profit:- It motivates the business unit and its activities. Profit is requiredto bear or to take business risks. Profit help in accepting risks for earning more profit. Efficiency of all business activity is measured by profit It helps in wealth maximization. If profit is more, satisfaction & facility can be provided to its employees by increasing salaries & wages, free medicate treatment etc. Help in growth & development of the business. It bridges the gapwhen unit suffers loss. ATTITUDE TUTORIALS,AHMEDABAD-15
33. Describe positive & negative role of profit in business Negative role of profit: Many times, customers & employees exploited due to greediness of business man to earn maximum profit. Business man tries to cheat the customers by selling inferior product for earning more profit. Due to excess profit, business unit gains political powers & run govt. policies in its own way. Business units earning more profits try to destroy small units. Excess profit help in creating monopoly in the market. For earning more profit, business units ignores pollution control. Prices of the product are kept higher to get more profit. ATTITUDE TUTORIALS,AHMEDABAD-15
34. Explain the term service or Employment & its characteristics Service is a physical or mental activity undertaken to get economic return in form of wages or salary, as per the contract. E.g. Labour working in a factory, Manager working in a bank. ATTITUDE TUTORIALS,AHMEDABAD-15
35. Explain the term service or Employment Its characteristics: Employee gets fixed remuneration in return of his work at fixed intervals. Qualifications, working hours, timings, etc. are fixed. It is a dependent activity. Employee has to work according to predetermined rules of employee etc. It is a continuous activity. Other benefits (other then wages or salary) like provident funds, free medical check-up etc., is there. In services, a person is transformed or promoted according to the rules. Both employee & employer have to follow the pre-decided rules & regulations. Certainty of income is there. ATTITUDE TUTORIALS,AHMEDABAD-15
36. What is profession & State its features Profession is an economics activity in which specialized service is rendered for a fixed fee (according to the agreement). In a profession, a person obtains specialized knowledge, acquires experience & develops skill in particular field. E.g. Lawyer, Doctors, MBA. ATTITUDE TUTORIALS,AHMEDABAD-15
37. What is profession Its features: It is related with human needs. It is meant for independent earning. Fee is the reward of the profession. Fees charged vary. Return is uncertain. Time duration is not fixed. In profession, a person work according to the code determined by the association. These activities are related to consultancy (not directly related to production or distribution of goods & services) The person has specialized knowledge, training & degree in particular field. ATTITUDE TUTORIALS,AHMEDABAD-15
38. Write a note on Business activities in ancient India Historical evidences say the presence of business activities in ancient India. Production activity was family oriented. Every family used to produce goods for self sustain. Barter system was the mode of exchange. Horses, camels etc. were modes of transports in Aryan times. According to Kautilya, in Maurya& Gupta times, trading of gold, silver, spices, cloth was used to be done with Ceylon and China. During Muslim rules, many battle in north India gave development to trade by land route from Lahore to Kabul etc. Surat was important center of trade industry to export cloth, ivory, etc. Mughal rule built roads. With the development of shipping, trading started with East Africa and Middle East Regions. This proves the presence & progress of trade & business in ancient India. ATTITUDE TUTORIALS,AHMEDABAD-15
39. Write a note on modern (current) Business activities. Trade & Commerce was progressing in ancient time & hence it has developed a lot in India after independence. Due to industrial revolution, import of goods is reduced & export of finished goods & spices etc. is increased. Five year plans helped India to stand in time with developed countries. Production & Development in agriculture sector is incresingday by day. Infrastructures is developing rapidly to provide move facilities & helping small large scale industries. Government is playing very important role in modern business activities. They restrict the concentration of power in one’s hand, helps in development of industries in some areas. They give incentives to small & large scale industries & the industries which exports. Internal & foreign trade sectors & export activities increased. Standard of living of the people has risen-up. ATTITUDE TUTORIALS,AHMEDABAD-15
