Chapter Notes (Part - 1) - Nature and Purpose of Business, BST, Class 11 | EduRev Notes

Business Studies (BST) Class 11

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Commerce : Chapter Notes (Part - 1) - Nature and Purpose of Business, BST, Class 11 | EduRev Notes

The document Chapter Notes (Part - 1) - Nature and Purpose of Business, BST, Class 11 | EduRev Notes is a part of the Commerce Course Business Studies (BST) Class 11.
All you need of Commerce at this link: Commerce

CONCEPT AND CHARACTERISTICS OF BUSINESS
All Human beings where ever they may be require different type of goods and services to satisfy their needs. Business is a major economic activity in all modern societies concerned with production and sale of goods and services required by the people. It is aimed at earning money by satisfying human demands.
Meaning: Literal meaning of Business is “BUSY”. Business is defined as an economic activity involved in the production and sales of goods and services undertaken with the motive of earning profit by satisfying human needs in the society.

CHARACTERISTICS OF BUSINESS ACTIVITIES
Chapter Notes (Part - 1) - Nature and Purpose of Business, BST, Class 11 | EduRev Notes

  • Economic activity: It means an activity aimed at earning money. Business is also aimed at earning money or livelihood by satisfying human needs.
  • Production and procurement of goods and services: Every business enterprise must either manufacture the goods or it acquires from producers. Goods may be consumer goods or Capital goods. Services means facility offered to consumers like banking, insurance etc.
  • Sale or exchange of goods and services: Business involves transfer or exchange of goods and service for value.
  • Dealing in goods and services on a regular basis: It should be a regular activity. One time sale or exchange will not be considered as business.
  • Profit earning: Business always aims at earning profit.
  • Uncertainty of earning: There is always a possibility of less amount of profit or even loss in business.
  • Element of Risk: There is always a possibility of Uncertainty of earnings.

BUSINESS, PROFESSION AND EMPLOYMENT
Chapter Notes (Part - 1) - Nature and Purpose of Business, BST, Class 11 | EduRev Notes


CLASSIFICATION OF BUSINESS ACTIVITIES
Chapter Notes (Part - 1) - Nature and Purpose of Business, BST, Class 11 | EduRev Notes

1. Industry 
Production or processing of goods and services. It is concerned with changing the form of the products. It gives form utility to the products. 

It is classified into the following:
(a) Primary
Extraction and production of natural resources and reproduction and development of living organisms, plants etc.
(i) Extractive industry: Mining, lumbering, hunting and fishing operations.
(ii) Genetic industry: Breeding plants and animals. Poultry farming and fish hatchery.

(b) Secondary 
(i) Manufacturing industry: Production and processing of goods creating form utilities.

Analytical industry: Separate different elements from the same materials. Example: Petroleum, Diesel.etc.
Synthetical Industry: Combines various ingredients.

Example: Cement, Textiles, etc.
Processing industry: Involves series of activities.

Example: Sugar and Paper.
Assembling Industry: Assembles different components.

Example: Television, Car, Computer.


(ii) Construction Industry: Construction of Buildings, dams, bridges, etc.

(c) Tertiary
Support services to primary and secondary industries.

2. Commerce
It includes all those activities which are concerned with removing all the hindrances in the movement of goods from the manufacturer to the consumers. It includes the following activities.

Chapter Notes (Part - 1) - Nature and Purpose of Business, BST, Class 11 | EduRev Notes

Commerce includes the following activities:
1. Industry
2. Trade – Export, Import
3. Transport and communication
4. Banking
5. Insurance
6. Advertisement
7. Packaging
8. Warehousing etc.

TRADE
Trade means exchange of goods and services between sellers and buyers with profit motive.
Chapter Notes (Part - 1) - Nature and Purpose of Business, BST, Class 11 | EduRev Notes

Auxiliaries to Trade:
1. Transport and communication: Physical movement of goods from the place where there is no demand to the place where there is demand. It creates place utility to the product.
2. Banking and Finance: Helps in removing financial hindrances. Facilitates production, buying and selling by providing funds by way of loans.  
3. Insurance: It facilitates business by ensuring compensation for various types of risks.  
4. Warehousing: It keeps the goods in tact till they are in demand. It creates time utility to the product.  
5. Advertising: It provides information about availability of goods and services. It induces the consumers to buy the product.

OBJECTIVES OF BUSINESS
An objective is the starting of business. Every business is directed towards the achievement of certain business objectives. Objectives are needed in every area that influences survival and prosperity of business.
Primary objective of every business is to earn profit but there are several other areas where objectives are needed.
Chapter Notes (Part - 1) - Nature and Purpose of Business, BST, Class 11 | EduRev Notes

BUSINESS RISK
It refers to the possibility of inadequate profits or even losses due to uncertainties or unexpected events.  
Chapter Notes (Part - 1) - Nature and Purpose of Business, BST, Class 11 | EduRev NotesNature Of Business Risks:  

  • Business risks arise due to uncertainties.  
  • Risk is an essential part of business. 
  • Degree of risk depends upon the nature and size of business.
  • Profit is the reward for risk taking.  

Causes of Business Risks:
1. Natural Causes: Risk may be due to flood, earth quake, lightning, heavy rains etc.
2. Human Causes: It includes dishonesty, carelessness or negligence of employees, strikes, riots, etc.
3. Economic Causes: It includes uncertainties relating to demand for goods, competition, price, collection of dues from customers, changes in economic policies etc.
4. Other Causes: It includes political disturbances, mechanical failures etc.

FACTORS TO BE CONSIDERED BEFORE STARTING A BUSINESS
1. Selection of Line of Business: Based on the requirements in the market nature and type of business to be selected.
2. Size of the Firm: Based on the amount of funds available and demand for the product in the market size of the firm i.e small scale or medium or large scale to be decided.
3. Choice of form of ownership: Based on the amount of capital required, legal formalities to be filled in, liability of the owner, etc. the form of ownership is to be decided.
4. Location of the Business enterprise: Based on the availability of raw material and infrastructure facilities location of the Business is to be selected.
5. Financing the Proposition: Requirement of Capital and its sources must be decided.
6. Physical facilities: Availability of physical facilities including machines and equipment, building and supportive services to be considered before starting a business.
7. Plant layout: Plant layout should draw to show the arrangement of these facilities.
8. Competent and committed worked force: Every business needs work force. So careful planning should be about selection, training and motivation of employees.
9. Tax Planning: Tax liability and its impact on business to be considered.
10. Launching the enterprise: After fulfilling the formalities entrepreneur can launch the business.


SHORT ANSWER TYPE QUESTIONS

Q.1. State the different types of economic activities.
Ans.
Business, profession and Employment.

Q. 2. Name the trade where the goods are bought from the foreign country.
Ans. Import trade.

Q.3. State examples of Analytical industries.
Ans. Petrol, diesel

Q.4. Which industry provides services to primary and secondary industry?
Ans. 
Tertiary industry

Q.5. Give the meaning and two examples of Economic activities.  
Ans.
It means an activity aimed at earning money. Business is also aimed at earning money or livelihood by satisfying human needs.
Example:

  • A person selling tea and coffee in the railway station.
  • Doctor treating patients at his clinic. 

HOTs
Q.1. Harish produces wheat for personal consumption. Will it be a business activity?
Ans. No, as it is not performed for earning profit.

Q.2. A person sells his old car at a profit. Can it be termed as a business activity? Explain.
Ans.
No, because business involves dealing in goods on regular basis. Brief Explanation of features of business is given in this document above.

Q.3. Risk is an inherent element of a Business. Do you agree? Explain.
Ans. Meaning and Nature of Business Risks detailed answer is given in this document above.
Role of Profit in Business:
1. It is source of income for the business man.
2. It provides funds for expansion.
3. It is an indicator of efficiency of business man.
4. It builds up reputation.

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