Business is an economic activity of production and distribution of goods and services. It is an economic activity corned with creation of utilities for the satisfaction of human wants. It provides a source of income to the society. Business results into generation of employment opportunities thereby leading to growth of the economy. It brings about economic development of the country and the individual.
Features of Business
There are 5 broad features of business:
Dealings in Goods and Services
Business deals with goods and services. Goods are divided into consumer goods like bread, butter, shoes, shirt etc. and producer goods like machinery, tools, equipment etc. It also deals with services like transport, banking, insurance etc.
Production and Exchange
Business is carried out only when goods and services are produced and exchanged for money. If goods are produced for self-consumption, such an activity is not treated as business. Buyer and seller are the two parties involved in a business activity.
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The basic activity of any business is trading. The business involves buying of raw material, plants and machinery, stationary, property etc. On the other hand, it sells the finished products to the consumers, wholesaler, retailer etc. Business makes available various goods and services to the different sections of the society.
Continuity and Regularity in Trade
An activity is said to be a business when it maintains continuity and regularity. Business is not a single time activity. It is a continuous process of production and distribution of goods and services. A single transaction of trade cannot be termed as a business. A business should be conducted regularly in order to grow and gain regular returns.
For example, if a person sells his house, it is not said to be a business because continuity is not there in dealings. If he repeatedly buys houses and sell them to others, such activity is treated as business.
Profits are very important so as to enable the business to survive, grow, expand and get recognition. Profit is an indicator of success and failure of business. It is the difference between income and expenses of the business. The primary goal of a business is usually to obtain the highest possible level of profit through the production and sale of goods and services. It is a return on investment. Profit acts as a driving force behind all business activities.
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Element of Risk
Risk is said to be the possibility of incurring loss. Risk is defined as the effect of uncertainty arising on the objectives of the business. Element of Risk is associated with every business. Business is exposed to two types of risk, Insurable and Non-insurable. Insurable risk is predictable. Risks are of two types—one whose probability can be calculated and insured. E.g.—re, theft etc. and the other whose probability cannot be calculated and which cannot be insured. e.g.—fall in demand, changing fashions etc.
Objectives of Business
There are 3 different objectives of business.
- Earning of profits.
- Exploring new markets and creating more customers.
- Growth and expansion of business operations of the firm.
- Making innovations and improvements in goods and services.
- Supply of quality goods to the community.
- Providing goods at reasonable prices.
- Ensure fair returns to investors.
- Avoidance of profiteering and unfair practices.
- Providing more employment opportunities to the people in the country.
- Fair deal to employees in terms of wages and incentives.
- Provide job satisfaction.
- Providing better working conditions and environment to the employees.
- Provide the employees more growth opportunities.
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