Answer the following.
1) Give comparative analysis of business, profession and employment.
Ans:-
Sr. No. | Point of Difference | Business | Profession | Employment |
1) | Meaning | In this economic activity, goods and services are produced and distributed. | In this economic activity, expert services are rendered. | In this economic activity, one person works under another person. |
2) | Reward / Return | Businessmen earn profit. | Professional charges fees as a return to professionals. | An employee receives wages or salary |
3) | Capital investment | Capital investment depends on size and nature of business. | Limited capital investment is required except the self-employed professional. | No capital investment is necessary. |
4) | Nature of work | It provides goods and services to the public. | It renders personalized expert services. | They perform the work as per service contract. |
5) | Qualification | No minimum qualification is prescribed. | Expert knowledge and training in a particular field needed. | It is prescribed by the employer. |
6) | Decision Making | Businessmen are free to take the decisions. | Professionals take expert decisions in their profession. | Employee does not have any power to take any decision. |
7) | Risk | Profit is uncertain and irregular so high risk is present. | Fees is generally not certain and regular. | Fixed and regular pay is given by employer as per contract so no risk is involved. |
8) | Examples | Builders, Grocers, Super market etc. | Doctor, C.A., Lawyer etc. | Clerk, Teacher, Officers etc. |
2) Define business. Explain its features.
Ans:- Meaning:-
It is a systematic attempt by business persons to produce goods and services and sell them in the market, to reap the reward by way of profit. It satisfies multiple and complex needs of the society .
Definition of Business :-
Prof. Haney – “Business activities are all those human activities which are directed towards the production and processing of wealth
Characteristics / Features of Business :
1. An Economic Activity :
Business is an economic activity as it is undertaken to earn money or livelihood. It is not because of love, affection, feelings, sentiment etc.
2. Two Parties :
Every business transaction involves an exchange. Minimum two parties are required for exchange i.e. the seller and the buyer. Business transaction is a result of an agreement between the buyer and the seller which may be oral or written.
3. Profit Motive :
The basic purpose of business is to earn the profit from its activities. Businessmen try to maximize profits either by increasing the volume of sales or reducing its costs. It is the spine of business which keeps the business going on in the long term. The amount of profit may differ from business to business.
4. Production of Goods and Services :
Before exchanging the goods and services, they should be produced by business enterprises. Goods are either manufactured or procured from the supplier, with the aim of selling it further to the consumers for profit.
5. Exchange of Goods and Services :
Business involves transfer of goods and services directly or indirectly with money or money’s worth. Monetary exchange is the exchange with money e.g. buying notebook for cash. On the other hand in case of Barter Exchange goods and services are exchanged for some other goods and services. e.g. wheat is exchanged for rice. If goods are produced for own consumption i.e. stitching a dress for a daughter, it cannot be called as a business activity but stitching of dress in a tailoring shop and taking stitching charges for that is a business activity. Similarly, if goods are donated or given as a gift then it cannot be considered as business activity
6. Dealings in Goods and Services :
Every type of business transaction is concerned with either goods or services. In the absence of goods and services business can not take place. These goods are consumer goods or capital goods. However, services created for business purpose are intangible which are essential for doing the business e.g. transportation, banking, insurance etc.
7. Continuity in Dealings :
Every business requires regularity in transactions. One single transaction does not constitute business e.g. If a person sells his own motor car and earns profit then it will not be considered as business activity. But if he is a car dealer so he sells and purchases cars regularly then, it is considered as business activity.
8. Uncertain Returns:
In business, the returns are never predictable or guaranteed. Businessman may earn profit or suffer a loss.
9. Element of Risk :
Risk is the key element of every business which is concerned with exposure to loss. It is due to some unfavorable or undesirable event. Every business will have some or the other risk. Intensity of risk can be minimized but can’t be avoided. Certain factors are beyond the control of businessmen like changes in consumer tastes, likes-dislikes, fashions, changes in the methods of production, fire, theft, natural calamities etc. No business is free from the above mentioned factors.
10. Customer Satisfaction :
Customer satisfaction is the ultimate aim of all economic activities and business is not an exception to it. Modern business believes in satisfying the customers by providing quality products and services at a reasonable price. The purpose of the business is to create and retain the customers.
3) Describe various objectives of a business.
Ans:- Meaning:-
It is a systematic attempt by business persons to produce goods and services and sell them in the market, to reap the reward by way of profit. It satisfies multiple and complex needs of the society .
Definition of Business :-
Prof. Haney – “Business activities are all those human activities which are directed towards the production and processing of wealth.
All business activities are guided by objectives.
They are further classified as:-
1) Economic Objectives
2) Social Objectives
1) Economic Objectives
a. Earning Profit : Profit is required for survival of the business and for its growth.
b. Searching New Customers : Business organizations have to work hard to create new customers and also to maintain the existing customers.
c. Innovations : It is a development or positive change which results into improvement in product or process of production. It has to spend money on R& D (Research and Development), market survey, use of technology etc.
d. Best Possible Use of Resources : Resources are scarce and have alternative uses. They should be used to its maximum and should not be wasted. Optimum use of resources ultimately leads to increasing profits.
2) Social Objectives :
a. Supplying Quality Products :
Every business has to provide quality products to its customers. Quality means a combination of purity, safety, durability, utility etc
b. Avoiding Unfair Trade Practices :
Unfair trade practices like black marketing, misleading advertisements, wrong measurement etc. should be avoided. It is important for survival and growth of a business unit.
c. Employment Generation :
Business is a socio-economic institution. Business should create jobs for skilled and unskilled people. It should provide employment opportunities to economically backward and divyang persons.
d. Welfare of Employees :
Skilled and unskilled workers are the part of the society. So if employees are properly taken care of, it brings welfare to the society. This can be achieved by providing fair and regular remuneration, good working conditions, impartial personnel policies, offering incentives etc.
e. Help to Solve Social Problems :
Due to rapid industrialization, many social problems arise like traffic jams, growth of slums, air and water pollution etc. Business should be aware of this and should try to reduce them.
f. Contributing to the Welfare of the Society : Business house should take care of general welfare of the society. For that they should give donations for good cause, offering scholarships for higher education etc.
4) Explain the importance of profit in business.
Ans:- Meaning:-
It is a systematic attempt by business persons to produce goods and services and sell them in the market, to reap the reward by way of profit. It satisfies multiple and complex needs of the society .
Definition of Business :-
Prof. Haney – “Business activities are all those human activities which are directed towards the production and processing of wealth.
Every business operates with an aim to earn profit that is the excess of revenue over cost.
Profit = Revenue – Total cost
Importance of profit in business:-
1. Returns to Investors : The people who invests money in the business expect fair returns on their capital. This is possible if adequate profits are earned by business.
2. Research and Development (R&D) : Adequate profit enables a firm to spend more on R & D . This can lead to better technology and lower costs. Innovative products benefit the whole nation.
3. Growth and Expansion : Retention of profit is the internal source of funds. This profit can be used for increasing the volume of business through expansion and diversification. The portion of the profit is re-invested in the business for further development.
4. Increases Efficiency : Profits facilitate payment of various dues in time. It also motivates the employees working in the organization. This finally leads to increase in overall efficiency of the organization.
5. Means of Livelihood :Businessmen earn profits which is their means of livelihood. By earning sufficient profits they can live a decent standard life through satisfaction of various wants.
6. Reward for Risks : Profit is considered as a reward for assuming several business risks. Profits also serve as a protection against those risks which cannot be insured e.g. fall in demand, adverse government policy etc.
6. Survival : It helps the business to continue to exist in the market. If the business does not make enough profit, it will not survive in the growing competitive environment. Profit means survival in competitive environment.