Question

What is the meaning of business and explain its features.

Answer 1

business

• Business is defined as an organised economic activity, wherein the exchange of goods and services takes place, for adequate consideration. It is nothing but a method of making money, from commercial transactions. It includes all those activities whose sole aim is to make available the desired goods and services to the society, in an effective manner.

• It is a systematic attempt of the businesspersons to produce goods and services, and sell them at the market, to reap the reward, by way of profit.

• Profit plays a pivotal role, as all the business activities are directed towards it, because it works an incentive to the entrepreneurs, for their efforts, and thus, necessary for every business.

✨✨Features of Business ✨✨

economic activity

• Business is an economic activity, as it is conducted with the primary objective of earning money, i.e. for an economic motive.

Production/purchase of goods and services:

• Goods and services are produced or procured by business entities, so as to add value and sell them to the consumer. Goods are either manufactured by the company or procured from the supplier, with the aim of selling it further to the consumer, for profit.

Selling of goods and services:

• Business must involve the transfer of goods to the customer for value, through selling, meaning that if the goods are acquired for personal consumption, then the transaction will not amount to business activity.

Continuity in dealings:

• Every business requires regularity in transactions, i.e. an isolated transaction of exchange of goods or services will not be considered as business. So, to constitute business, the dealings must be carried out on a regular basis.

Profit earning:

• The basic purpose of business is to make the profit from its activities. It is the spine of business, which keeps the business going, in the long term.

Element of risk:

• Risk is the key element of every business, concerned with exposure to loss. Efforts are made to forecast future events and plan the business strategies accordingly. However, the factors that affect business are uncertain and so does the business opportunities, which can be a shift in demand, floods, fall in prices, strikes, lockout, money market fluctuation, etc.

Answer 2

What is Business ?

Business is that economic activity that involves sale and exchange of goods and services on a regular basis and is conducted with the view of earning profit.

Features of Business

Some features of business are listed in its definition itself. They are:

1. Economic Activity: Business is an economic activity because it involves  exchange of goods and service for money. For example, a business man Mr. A buys pens for Rs. 10 and sells them for Rs. 12. Here, money is involved and Mr. A is earning his livelihood. So, business is an economic activity.
2. Sale and Exchange of Goods and Services: Business involves sale and exchange of goods and services. Goods that are bought for personal use are not a part of business.
3. Regularity: A one time transaction performed and profit earned doesn't constitute business. A business needs to be regular. For example, Mr. A has a business of buying and selling pens but when he sells his old television (let's say he bought it for Rs. 5000 and sold it for Rs. 5500), it's not a part of business because he will not regularly sell televisions; instead, he will regularly sell pens.
4. Earning Profit: The main objective of business is to earn profit. No business can sustain long without profits.

Other features of business include:

1. Element of risk: No business is free from risks and risk is an essential part of business.
2. Production or Procurement of goods and services: For sale of goods and services, they first need to be either produced/manufactured or bought from a manufacturer or wholesaler to be further sold.
3. Uncertainty of return: No matter what we invest in a business, it is never free from risks and hence, incidents like fire, theft, or natural calamities or maybe accidents can lead to losses or very low profits.