Saturday, December 10, 2016

Business Studies - Class 11: Nature and Purpose of Business

Unit – 1: Nature and Purpose of Business
Short Question and Answer (1/2/3 Marks)
Q.1. Define business.                                                                                                    1999, 2001
Ans: Business is an economic activity, which is related with continuous and regular production and distribution of goods and services for satisfying human wants.
Q.2. What are non- economic activities?                              2008, 2010
Ans: Non-economic activities are those activities, which are pursued by human beings because of social, psychological and religions sentiments. For example: working in own garden, cooking for family members.
Q.3. What are economic activities?                                          
Ans: Economic activities are those that are concerned with production, exchange and distribution of goods and rendering of services to earn money.
Q.4. What is business risk?                       
Ans: Business Risk: Business risk means possibility of some occurrence, which might lead to some loss for the business.
Q.5. What is meant by Profession? Explain with examples.                         1999, 2004, 2010
Ans: A profession is a specialised occupation, which involves rendering of personal services by using professional knowledge. Code of conduct it the characteristics of profession. The examples of professionals are doctors, lawyers, accountants, engineers etc.
Q.6. What term is used to refer to physical arrangement of machines and equipment needed to manufacture a product?

Ans: Plant layout
Q.7. ABC Ltd. is planting trees on roadside. Which objective is trying to achieve?
Ans: Social Objective.
Q.8. What type of industry is banking?
Ans. Tertiary
Q.9. Define human objectives of business.                        
Ans: The human objectives of business are given below:
a)      The employees are treated as partners in business and not as inferior lot.
b)      They should get fair wages and healthy working conditions.
c)       They should be able to acquire and develop new skills in the process of employment.
d)      They should derive job satisfaction.

Long answer type questions
Q.1. Define the term Business. What are its characteristics? Distinguish between business, Profession and employment.
Ans: Business is an economic activity, which is related with continuous and regular production and distribution of goods and services for satisfying human wants.
Lewis Henry defines business as, "Human activity directed towards producing or acquiring wealth through buying and selling of goods."
Thus, the term business means continuous production and distribution of goods and services with the aim of earning profits under uncertain market conditions.
Characteristics or features of business are discussed in following points:  (1999, 01, 06, 10, 15)
a)      Exchange of goods and services: All business activities are directly or indirectly concerned with the exchange of goods or services for money or money's worth.
b)      Deals in numerous transactions: A businessman regularly deals in a number of transactions and not just one or two transactions.
c)       Profit is the main Objective: The business is carried on with the intention of earning a profit.
d)      Business skills for economic success: To be a good businessman, one needs to have good business qualities and skills.
e)      Risks and Uncertainties: Business is subject to risks and uncertainties.

Q.2. Define Business, Profession and Employment. Mention its features. Distinguish between Business, Profession and employment.                    2003, 05, 06, 09
Ans: Business: Business is an economic activity, which is related with continuous and regular production and distribution of goods and services for satisfying human wants.
Profession: A profession is a specialised occupation, which involves rendering of personal services by using professional knowledge.
Employment: Employment is a type of occupation in which employee has to perform work as per service contract or according to the direction of the employer.                                         2009
Nature of business, profession and employment: Points given in difference can also be used as their respective nature.
Comparison of Business, Profession and Employment:
Basis
Business
Profession
Employment
1. How to Start?
Based on owners decision.
Getting membership of a professional body
Getting an appointment letter.
2. What is its nature?
Providing goods and services to the public.
Rendering of personalized expert services.
Performing work as
per service contract
3. Who can start?
No minimum qualification

Requires qualification and training in a specific field.
Requires qualification and training.
4. Return/What will we get?
Profit.
Professional Fees.
Salary.
5.  Capital
Requires Capital as per size of the business.
Requires limited capital.
Not capital required.
6. Risk involved
More risk
Less Risk
No Risk

Q.3. What are economic and non-economic activities? What are various classes of business activities? Distinguish between Commerce, Trade and industry.
Ans: Economic activities are those that are concerned with production, exchange and distribution of goods and rendering of services to earn money.
Non-economic activities are those activities, which are pursued by human beings because of social, psychological and religions sentiments.
Classification of Business Activities:
a)      Industry
b)      Commerce
c)       Trade
a)      Industry: It includes production or processing of goods and services. It is concerned with changing the form of the products. It gives form utility to the products.                                            2007
b)      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 trade and auxiliaries to trade.
c)       Trade: Trade means exchange of goods and services between sellers and buyers with profit motive.

Q.4. What is industry? Mention its various types.
Ans: Industry: It includes production or processing of goods and services. It is concerned with changing the form of the products. It gives form utility to the products.
Types of industry:
1. Primary Industry: Extraction and production of natural resources and reproduction and development of living organisms, plants etc.
2. Secondary Industry: Processing the materials got in the primary industries
3. Tertiary Industry: Support services to primary and secondary industries. It includes auxiliaries to trade.
Types of Primary industry:                          2008
Primary Industry is further divided into two parts:
a. Extractive Industry: E.g. Mining, lumbering, hunting and fishing operations
b. Genetic Industry: E.g. Breeding plants and animals, Poultry farming and fish hatchery
Types of Secondary Industry                                       2009
Secondary industry is further divided into two parts:
a. Manufacturing Industry: Production and processing of goods creating form utilities.
b. Construction Industry: Construction of Buildings, dams, bridges, etc.
Q.5. What is commerce? Mention it various types.
Ans: 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 trade and auxiliaries to trade. (1999, 05, 08)
Commerce includes the following activities:
a)      Trade
b)      Auxiliaries or aids to trade
a)      Trade: Trade means exchange of goods and services between sellers and buyers with profit motive. Trade may internal trade and external trade. Internal trade includes wholesale trade and retail trade and external trade includes import, export and entrepot trade.
b)      Auxiliaries to Trade: Auxiliaries of trade refer to the integration of all the agency services, which facilitate the distribution of goods and services. It includes:                                    2004, 07, 09
1.       Transport and communication:  Physical movement of goods from the place where there is no demand to the place where there is demand.  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.
Q.5. What is business risk? What is its nature? Explain its causes.
Ans: Business Risk: Business risk means possibility of some occurrence, which might lead to some loss for the business.
The nature of business risks shall be clear from the following features:
a)      Uncertainty gives rise to business risk: Uncertainty is an important feature of any business. Fluctuations in demand or prices, wrong estimates of demand and supply, changes in government policies are some of the examples of uncertainly, which influence the business.
b)      Risk is an essential element: No business can run without some element of risk in it. In fact business means assuming risk.
c)       Reward for undertaking risks in profit: “No risk, no gain” is an important principle which is applicable to all types of businesses.
d)      Degree of risk depends upon the nature of business: The nature of business and the volume of operations determine the degree of risk.
Causes of business risks may be classified as follows:
a)      Natural Causes: Human beings have no control over the nature. Unforeseen events like heavy rains, famine, earthquake etc. affects business adversely.
b)      Human causes: These include dishonesty, carelessness and negligence of employee, riots, strikes etc.
c)       Economic Causes: Economic causes relate to fluctuations in demand and price or changes in the market conditions.
d)      Physical Causes: These include all technical or mechanical causes, which affect the working of the business.

Q.6. Can profit be the sole objective of Business?           2015                     
Ans: According to Urwick, “Earning of profits cannot be the objective of a business any more than eating is the objective of living”
Arguments in favour of profit as the sole objective: Earning of profits is essential for a business due to the following reasons:-
a)      It is source of income for the business man.
b)      It provides funds for expansion
c)       It is an indicator of efficiency of business man.
d)      It builds up reputation.
Arguments against profit maximization: Profit maximization should not be the sole motive of any business:
a)      Profit maximisation ignores the interest of labour, customers, society etc.
b)      Unfair means such as hoarding, black marketing or adulteration may be practiced to maximise profit.
c)       Long-term interest of the business may be ignored to maximise profits in the short run.
d)      In short, a business must pursue not only economic (profit) objectives but also the social and human objectives.
Q.7. Write a short note on role of profit in an organisation.
Ans: Role of Profit in Business:
a)      It is source of income for the business man.
b)      It provides funds for expansion
c)       It is an indicator of efficiency of business man.
d)      It builds up reputation.
Q. 8. Explain the Objectives of Business.                                                              2004, 08, 10
Ans: The main objective of a business undertaking is to earn profits. Profit earning is considered necessary for the survival of the business. The objectives of the business may be categorised under these headings:
(a) Economic Objectives
(b) Human Objectives
(c) Social Objectives
(a) Economic Objectives: Economic objectives of a business are
1. Profit earning for existence and expansion of business.
2. Production and sale of Goods to earn profit.
3. Creating Markets to sell products.
4. Technological Improvement to keep pace with the changing business world.
(b) Human Objectives: Human objectives of business are that a workable balance should be maintained among the claims of various interested groups like employees, shareholders and consumers. These objectives can be discussed as follows.
1. Welfare of employees by providing physical comfort, material incentives, appreciation, and dignity of labour.
2. Satisfaction of Consumers should be given due weightage.
3. Satisfaction of Shareholders by giving reasonable return on the money invested by the shareholders.
(C) Social Objectives or Social Responsibility of the Business: The social responsibility of the business can be studied as follows. 
1.   To make Goods and Services available to meet requirements of the society.
2.  To Supply Quality Goods at reasonable price.
3.  Co-operation with the Government.
4. To make proper Financial Planning to make sure that adequate funds are raised at the minimum cost.

Q.9. Compare and contrast between Industry, trade and Commerce.                     2004
Ans: Comparison between Industry, Trade and Commerce:
1) MEANING: Industry- Extraction, reproduction, conversion, processing and construction of useful products.
Commerce- Activities involving distribution of goods and services.
Trade - Purchase and sale of goods and services.
2) SCOPE: Industry- Consists of all activities involving conversion of materials and semi-finished products into finished products.
Commerce - Comprises trade and auxiliaries to trade.
Trade - Comprises exchange of goods and services.
3) CAPITAL: Industry- Generally large amount of capital is required.
Commerce- Need for capital is comparatively less.
Trade - Capital is needed to maintain stock and grant credit.
4) RISK: Industry- Risk involved is usually high.
Commerce- Relatively less risk is involved.
Trade - Relatively less risk is involved.
Q.10. Distinguish between economic and non-economic activities.                                        2007
Ans: Economic and non-economic activities are undertaken with a different object and purpose and they are different from each other in the following ways:
1. Objective: Economic activities are performed to earn money. Non- economic activities are performed out of love and affection or out of duty. The purpose of undertaking these activities is to get some satisfaction.
2. Scope: Economic activities may take place between employers and employees or between producers and consumers. Non-economic activities may be among members of a family, social worker and those being served etc.
3. Money Measurement: Economic activities are measured in money or money’s worth while non-economic activities have no money value.
4. Philosophy: Economic activities are backed by pragmatic philosophy of earning something out of them. Non-economic activities are performed with idealistic philosophy of attaching more importance to human values and less to money.

5. Expectation: The expectation of performing economic activities is to earn income or profit. Non-economic activities are performed to get mental satisfaction.

Labels

Absorption Costing (1) Accountancy (4) accounting for partnership firms (3) Accounting for Share Capital (3) accounts of non trading concern (3) advanced financial accounting (14) AHSEC (108) ahsec 11 (47) ahsec 12 (60) ahsec notes (104) AHSEC Question Papers (33) Assam Slet (10) bcfm (11) bills of exchange (6) branch accounting (3) Budgetary Control (3) Budgetary Control Notes (2) business communication (28) Business Environment Notes (7) business regulatory framewrok (47) Business Statistics Notes (23) cash flow statement (5) cbse 12 (19) cbse notes (27) commerce (13) company law (23) corporate accounting (33) corporate laws (14) cost accounting (63) cost and management accounting (34) cpt (36) cpt 200 (7) cpt notes (30) dibrugarh university (1086) dibrugarh university notes (571) dibrugarh university question paper (419) dibrugarh university solved papers (233) dibrugarh university syllabus (47) direct tax law (49) eco - 01 (4) ECO - 02 (2) ECO - 03 (2) ECO - 05 (6) ECO - 06 (1) ECO - 07 (1) eco - 08 (4) eco - 09 (1) ECO - 10 (2) ECO - 11 (3) ECO - 12 (7) ECO - 13 (2) ECO - 14 (4) entrepreneurship (14) fianancial accounting (3) financial accounting (48) Financial Accounting Notes (11) financial management (18) Financial statements analysis (14) funds flow statement (3) guwahati university (303) guwahati university syllabus (54) Hire Purchase (5) Human Resource Management (14) icwai (38) icwai notes (39) ignou solved assignments (83) ignou solved question papers (121) income from house property (5) income from salary (4) Income Under the head Salaries (11) information technology (10) Installment Purchase (4) issue of shares (4) kkhsou (13) M.com (63) Management Accounting Notes (25) MCQ (11) paper I (1) paper II (9) paper III (1) principle of business mangement (16) Principles of Marketing Notes (16) royalty accounts (3) sale of goods act (8) semester I (157) Semester II (155) semester III (66) semester IV (148) semester V (101) semester VI (91) slet (13) Slet Ne (10) Small Business Management (8) solved assignments (22) UGC - NET: Commerce (08) (14) UGC - NET: Commerce (08) Paper II (3) UGC - NET: Commerce (08) Paper III (14) ugcnet solved question papers (23) Variance Analysis Notes (1)