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POORNAPRAJNA P.U. COLLEGE, UDUPI, BUSINESS STUDIES, , BUSINESS INDUSTRY AND COMMERCE, INTRODUCTION, All human beings require different types of goods and services to satisfy their needs. The necessity of, supplying goods and services has led to certain activities being undertaken by people to produce and, sell what is needed by others. Business is a major economic activity in all modern societies as it is, concerned with the production and sale of goods and services to the needy people., , SECTION - I, History of Trade and Commerce, Trade and commerce have played a vital role in making India to evolve as a major actor in the, economic word in ancient times. Commercial cities like Harappa and Mohenjodaro were some, examples for the business development of ancient India. These civilizations had established, commercial connections with Mesopotamia and traded in gold, silver, copper, gemstones, beads,, pearls, sea shells etc. There were different types of coins and weighing practices during that time., Indigenous Banking System, As economic life progress, metallic money had been introduced which in turn accelerated the, economic activities. Documents such as Hundi and Chitti were in use for carrying out transactions in, which money passed from hand to hand., Hundi as an instrument of exchange, it involved a contract which warrant the payment of money, the, promise or order which is unconditional and capable of change through transfer by valid negotiation., , Indigenous banking system played a prominent role in lending money and financing domestic and foreign, trade with currency and letter of credit. With the development of banking, people began to deposit, precious metals with lending individuals functioning as Bankers or Seths, Hundies practiced by Indian Merchant Communities, Name of Hundi, , Category, , Payable to any persons – no liability over who received the, payment, , Dhani-jog, Sah-jog, , Function, , Darshani, , Payable to a specific person (someone respectable). Liability, over who received the payment., , Firman-jog, , Payable to order, , Dekhan-har, , Payable to the presented or bearer., , Dhani-jog, , Payable to any person – no liability over who received the, payment, but payment over a fixed term., , Firman-jog, Jokhmi, , Muddati, , Payable to order following a fixed term., Drawn against dispatched goods. If goods lost in transit, the, drawer or holder bears the costs and the drawee carries no, liability., , Sri. Sushanth S Nayak. Department of Commerce, , Page 1
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Rise of Intermediaries, Intermediaries played an important role n the promotion of trade. They helped the producers, especially in foreign trade. They consist of commission agents, brokers and distributors for wholesale, and retail of goods., Transport, Transport by land and water was popular in the ancient times. Roads as a means of transportation had, assumed key importance in the process of growth especially in inland trade. The northern trade route, from Bengal to Taxila was an example for the same., Maritime trade was another important branch of global trade network. Muziris (ancient harbor) in, Malabar Coast (near to the present-day Cochin) has a long history of international maritime trade., Calicut was also an important market for Chinese to acquire items like frankincense, pepper (black, gold), pearls, cotton etc., Pulicat on Coromandel Coast (Tamil Nadu) was a major port in the 17th century. Textiles were the, principal export item from Pulicat to Southeast Asia., Trading Communities, Different trading communities strengthened in ancient India and they dominated trade in different, parts of the country. Some of them are as follows:, Punjabi and Multani, Bhats, Mahajan, Chatt, , - Merchants in northern region, - Gujarat and Rajastan, - Western India, - South India, , Merchant Corporations, They were autonomous corporations (guilds) formed to protect the interests of the traders. These, corporations were organised on formal basis, framed their own rules and code of conduct, which even, kings were supposed to accept and respect. The guild chief directly dealt with the king or tax, collectors and settled the market toll (tax) on behalf of its fellow merchants at a fixed sum of money., Major Trade Centres, , 1. Pataliputra – Patna in Bihar today., stones., , Commercial town and major centre for export of, , 2. Peshawar – City in Pakistan. Very popular for export of wool and for the import of horses., Major transactions between India, China and Rome in the first century., , 3. Taxila – City in Pakistan, also called Thakshashila., financial and commercial banks., , Popularly known as the city of, , 4. Indraprastha – Located in the region of present-day New Delhi., It was a commercial, junction where most routes leading the east, west, south and north converged (joined)., 5. Mathura – City in UP. It was an emporium of trade and people here subsisted (lived) on, commerce. Many routes from South India touched Mathura and Broach (Bharuch in Gujarat)., , 6. Varanasi – City in UP. Well known centre for textile industries and became famous for gold silk, cloth and sandalwood workmanship. It had links with Taxila and Bharuch., 7. Mithila – City in Bihar. The traders in this city crossed the seas by boats, through Bay of Bangal, to the South China. They established trading colonies in South China., , 8. Ujjain – City in MP. Different verities of clothes were exported to different centres. It had trade, connections with Taxila and Peshawar., , 9. Surat – City in Gujarat., It was an emporium of western trade during Mughal period. They, were also famous for gold boarder sarees., 10. Kanchi – Present day Kanchipuram in Tamil Nadu., Chinese came here to purchase, pearls, glass and rare stones and in return they sold gold and silk., Sri. Sushanth S Nayak. Department of Commerce, , Page 2
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11. Madura – City in Tamil Nadu. It was the capital city of Pandya dynasty who controlled the trade, of pearl and fisheries of the Gulf of Mannar (shallow in between India and Sri Lanka)., , 12. Broach – Present day Bharuch in Gujarat. It was a major trade centre in Western India., 13. Kaveripatta – Present day Kaveripattanam in Tamil Nadu. It was scientific in its construction as, a city and provided loading, unloading and strong facilities of merchandise. It was also famous, for perfumes, cosmetics, scents, silk, wool, cotton and also for ship building., , 14. Tamralipti – City in West Bengal (Kolkata). It was one of the greatest ports connected both by, sea and land. It was linked by road to Banaras (UP) and Taxila., Major Exports and Imports, Spices, wheat, sugar, indigo, opium, sesame oil, cotton, parrot, live animals and animal products were, the major export items, whereas import items include horses, animal products, Chinese silks, linen,, wine, gold, silver, copper, etc., Position of Indian Subcontinent in World Economy (1AD to 1991), From 1st to 7th centuries, India was estimated to have the largest economy in the world. The country, was often referred as ‘Swarnabhumi’ and ‘Swarnadweep’ by many writers and travelers like, Megasthenes, Faxian (Fa Hien), Xuanzang (Huen Tsang) etc. because of its prosperity., During 18th century, the British empire began to take roots in India, thereby the Indian economic, condition was slowly changed from being an exporter of processed goods to the exporter of raw, materials and buyer of manufactured goods., India begins to Reindustrialise, After independence, the process of rebuilding the Indian economy have been started. As a part of this, the first five year plan was implemented in 1952. Due importance was given to the establishment of, modern industries, modern technological and scientific institutes, space and nuclear programs., To overcome the problems of lack of capital, rise in population, huge expenditure on defence,, inadequate infrastructure etc. India relied heavily on borrowings from foreign sources and finally,, agreed to economic liberalization in 1991., The Indian economy is one of the fastest growing economies in the world today. The high growth, sectors have been identified, which are likely to grow at a rapid pace and the recent initiatives of the, Government of India such as ‘Make in India’, ‘Skill India’, ‘Digital India’, Foreign Trade Policy 2015-20, etc. is expected to help the economy in terms of exports and imports and trade balance., , Sri. Sushanth S Nayak. Department of Commerce, , Page 3
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SECTION - II, Nature and Concept of Business Concept of Business, The term business is derived from the work ‘busy’. Therefore, business means being busy. In specific, sense, business refers to an occupation in which people regularly engage in activities related to, purchase, production and / or sale of goods and services with a view to earn profits., , Business is defined as the “repeated buying and selling or manufacturing of goods and services with, an intention to earn profit which involves the creation of wealth.” Example; A factory, A retail shop,, Commission agents, brokers etc., In every society, people undertake various activities to satisfy their needs. These activities can be, classified into two, they are Economic Activities and Non-Economic Activities., , 1. Economic Activities – These are those activities which are undertaken to earn money or, money’s worth and related to production and exchange of wealth. Eg; Running a factory, Retail, shop, Cultivating land etc. Economic activities may be further divided into three categories,, namely business, profession and employment., Characteristics of Economic Activities., a., b., c., d., , Economic Activities are related to production of wealth., These are undertaken to satisfy human wants., They are performed with an expectation of earning money., It acts as a basis for economic development of the society., , 2. Non-economic Activities – Non-economic activities are those activities which are undertaken, not for any reward but for the personal satisfaction. Example; A mother looks after her, children, A house-wife cooks food for the family, Visiting Temples etc., , Differences between Economic activities and Non-economic activities, ECONOMIC ACTIVITIES, , NON-ECONOMIC ACTIVITIES, , To earn money or money’s worth, , For, personal, satisfaction, , It can be measured in terms of money, , It cannot be measured in monetary terms, , Money is the reward, , Mental satisfaction is the reward, , or, , psychological, , CHARACTERISTICS OF BUSINESS, 1., 2., , 3., , 4., , Economic Activity – because it is undertaken with the object or earning money or livelihood., Production or procurement of goods and service – In order to offer the goods for consumption, they must be either produced or procured by the business enterprise. Goods may consist of, consumable goods, industrial goods or capital goods. Services include facilities offered to, consumers in such as transportation, banking, insurance, electricity etc. (Consumable goods –, Pen, soap, sugar etc., Industrial goods – Steel, cement etc., Capital goods – Machinery, furniture, etc.), Sale or exchange of goods and services – There should be sale or exchange of goods or services, between the seller and buyer. If goods are produced for personal use, it cannot be treated as a, business. Eg: Cooking food for the family is not a business, but cooking food and selling it to others, in a restaurant is a business., Regular Dealings – Business involves dealing in goods and services on a regular basis. One single, transaction of sale or purchase is not considered as a business. For example, if a person is selling, is old car is not considered as a business., , Sri. Sushanth S Nayak. Department of Commerce, , Page 4
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5., 6., 7., , Earning Profit – It is the main purpose of business. So that the businessmen should take all efforts, to increase the profit by increasing sales volume or reducing cost of production., Uncertainty of Return – No business can predicts its future profit as it is uncertain. Also there is a, possibility of loss being incurred., Element of Risk – Every business is subject to risk due to various reasons like change in fashion,, technological changes, increasing competition, fire, theft, accidents, natural calamities etc., , Comparison of Business, Profession and Employment, Basics, , Business, , Profession, , Employment, , 1, , Mode, of, Establishment, , Entrepreneur’s decision, and legal formalities, , Membership of a, professional body, , Contract of, employme, nt, , 2, , Nature of work, , Providing goods and, services to the public, , Rendering, personalized and, , As per the contract, , expert service, 3, , Qualification, , No minimum, qualification, , Prescribed, qualification by the, professional body, , Prescribed, by, the employer, , 4, , Reward or return, , Profit, , Fees, , Salary or wages, , 5, , Capital Investment, , High, , Limited, , No capital, , 6, , Risk, , High, , Limited risk, , Little risk, , 7, , Transfer of interest Possible, , Not possible, , Not possible, , 8, , Code of conduct, , Prescribed by the, , Laid down by the, , professional body, , employer, , CA, Legal, Medical, Profession etc., , Jobs, in, banks,, insurance, govt., , 9, , Examples, , Not prescribed, Shop, Factory etc., , departments etc., , Classification of Business, Business activities may be broadly classified into two broad categories – Industry and Commerce., , INDUSTRY, The term industry refers to the part of economic activities concerned with the production of goods, and materials. An industry may be classified into Primary Industry, secondary industry and tertiary, Sri. Sushanth S Nayak. Department of Commerce, , Page 5
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industry., , 1. Primary industries are concerned with the extracting, producing and processing of natural, resources. It may further be divided into extractive industries and genetic industries., a. Extractive Industries are engaged in the extraction (collection) of useful materials from the earth, and sea. Mining, fishing, agriculture, quarrying etc. are the examples for extractive industries., The products of these industries are either directly consumed or used as raw materials by other, industries., b.Genetic Industries are engaged in the reproduction or multiplication of plants and animals., E.g. Plant nurseries, Poultry farms, cattle breeding farms etc., 2. Secondary Industries are concerned with the materials which have already been produced, at the primary stage, and they are again classified into Manufacturing industries and, Construction industries., a. Manufacturing Industries are engaged with the conversion of raw materials into finished, goods. E.g. cotton into textiles, timber into furniture etc. they change the form of goods, i.e. raw material into finished goods and thus create form utility. Manufacturing industries, usually produce consumer goods such as soap, cloth, tooth paste etc., industrial goods such as, steel, cement etc. and Capital goods such as machinery and tools., Types of Manufacturing Industries:, i., ii., iii., iv., , Analytical industry – Separates different elements from the same material. Eg: oil refinery., Synthetical industry – Combines various ingredients into a new product. Eg: Cement., Processing industry – Go through successive stages for manufacturing a finished product. Eg:, sugar, paper etc., Assembling industry – Assembles different component parts to make a new product. Eg: TV, Car,, Mobile Phone, Computer etc., , b. Construction Industries are engaged in the construction of buildings, dams, roads, bridges etc. and, they use the products of manufacturing industries and extractive industries., 3. Tertiary Industries are providing support services to primary and secondary industries and it form, part of commerce. All service activities which are auxiliaries to trade like transport, banking,, insurance, warehousing, communication, packaging, advertising etc. fall under this category., COMMERCE, Commerce is concerned with the buying, selling and distribution of commodities and it is an organized, system for the exchange of goods and services in between the businessman and the customers. It is, also concerned with the marketing aspects of business, i.e. supply of right type of goods to the right, persons, at the right time and at the right price. Thus commerce includes trade and aids to trade., Definition – Commerce can be defined as the sum total of all those activities which are involved in the, removal of hindrances in the process of exchange of goods., FUNCTIONS OF COMMERCE, 1. Removal of Hindrance of Person: It refers to the lack of contact between the producers and, customers. Here the trader acts as an intermediary among them and customers are able to find, out the products which they are wanted from the market., 2. Removal of Hindrance of Place: It is a common problem that the producers and customers are, in distant places, hence the commodities should be transferred from the production centre to, the hands of customers. This problem can be solved by the system of commerce by means of, transport, packing and insurance., 3. Removal of Hindrance of Risk: Goods and properties of business are subject to various risk, Sri. Sushanth S Nayak. Department of Commerce, , Page 6
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such as fire, theft, damage etc., and they have to be protected by insuring the goods and, properties., 4. Removal of Hindrance of Time: There may be a gap between the production and consumption, as the production is carried out in anticipation of future demands. Therefore, it becomes, necessary to store the goods until they are sold. This problem can be solved by warehousing., 5. Removal of Hindrance of Knowledge: Advertising helps in the removal of hindrance of, knowledge among the buyers., 6. Removal of Hindrance of Finance: The problem of finance can be handled by banks, which form, part of commerce. It will also help the businessman in exchange of money between different, persons at different places., Make in India, It is an initiative launched by the Government of India on 25th September 2014, to encourage national, and multinational companies to manufacture their products in India. Its major objectives are job, creation and skill enhancement in 25 sectors of the economy. Some of them are, Automobile, Aviation,, Biotechnology, Chemicals, Construction, Defense, Electrical Machinery, Food processing, I T, Oil and, Gas, Media and Entertainments, Mining, Railways etc., TRADE, Trade means buying and selling of goods, which involves the exchange of commodities for money or, money’s worth., Types of Trade:, 1. Home Trade - It is also known as domestic trade or internal trade. It means that the buying and, selling of goods within the country and both the buyer and seller should belong the same, nation. Home trade is of two types:, a. Wholesale Trade - It implies that the buying and selling in large quantities. A wholesaler buys, goods directly from the producers and sells them to the retailers., b. Retail Trade – It involves buying and selling of goods in small quantities. A retail trader buys, goods from the wholesalers and sells them to the customers., 2. Foreign Trade – It is also known as External trade or international trade. It involves the buying, and selling of goods and services in between the persons belonging to two or more countries., Foreign trade is of the following types:, a. Export Trade – It implies the sale of goods to foreign countries., b. Import Trade – It refers to the purchase of goods from foreign countries., c. Entrepot Trade – It means importing goods from one country for the purpose of exporting, them to some other countries., Aids to Trade (Auxiliaries to Trade), The activities which assist trade are called aids to trade or Auxiliaries to Trade. It includes Transport,, Banking, Insurance, Warehousing, Advertising etc. These service enterprises facilitate movements,, storage, finance, risk coverage and sales promotion of goods., Aids to trade are briefly discussed below, 1. Transportation, Production of goods generally takes place in particular locations. But these goods are required for, consumption in different parts of the country. For instance tea is mainly produced in Assam but it is, consumed all over India. The hindrance of place is removed with the help of various transportation, facilities like road transport, rail transport, air transport etc., 2. Banking and Finance, Business activities can’t be undertaken unless funds are available for acquiring assets and meeting day to, day expenses. Banks help business firms to overcome the problem of finance by giving necessary funds., Banks also undertake collection of cheque, remittance of funds to different places, discounting bills of, exchange etc.Thus hindrance of finance can be removed with the help of banking., Sri. Sushanth S Nayak. Department of Commerce, , Page 7
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3. Insurance, Business involves various types of risks. Factory building, machinery, goods in stock or transit are subject, to the risk of loss or damages. Risk may arise due to fire natural calamities, accidents etc. Employees are, to be protected from risks of accidents. Insurance provides protection in all such cases. Hindrance of risk, can be minimized with the help of insurance., 4. Warehousing, There is always a time gap between the production and consumption of goods. They are to be kept in, good condition and make them available as and when required. Warehousing helps business firms to, overcome the problem of storage and facilitates the availability of goods when needed. Warehousing, stabilities prices by equalizing the supply of goods to the market. Thus hindrance of time can be removed, with the help of warehousing., 5. Advertising, Advertisement plays on important role in the process marketing. Through advertisement consumers get, information about a particular product and its use. It is one of the most important devices designed to, capture the attention of prospective customers and to create interest in the products which would, ultimately turn into sales. Thus advertisement removes hindrance of knowledge in the process of trade., Various means of advertisement are news paper, TV, magazine,, radio, internet etc., 6. Communication, Communication means exchange of ideas, facts, opinions, emotions, information etc. between two, or more persons. The successful operation of the business requires that there must be proper, communication between buyer and seller. Communication between them is required for placing order,, making complaints, making payments, deciding the terms of transactions etc. The various means of, communication are telephone, email, mobile phone, fax etc., OBJECTIVES OF BUSINESS, Objectives of Business mean the purpose for which a business is established and carried on., Objective setting is the starting point of any business. Objective serves as the guidelines for future, direction and management of business. Since a business has to balance a number of needs and, goals, it requires multiple objectives. Main objectives of business are the following:, 1. Earring profits, Main aim of any business is to earn profit. No business can survive for long without adequate profit., Business needs profit not only for its existence but also for growth and expansion. Profit is the, ultimate test of business performance., 2. Innovation, Innovation means introduction of something new to the market. It includes discovery of a new product,, introduction of new and improved methods of production, adoption of better distribution system etc., Introduce colour television in the place of black and white television is an example of product, innovation. Using the power looms in place of handlooms in weaving is an example of process, innovation. Today business world is highly competitive. No business enterprise can flourish, in a competitive world without innovation. So innovation became an important objective., 3. Market standing (creation of customers), Creation of customers or increase market share is an important objective of a business. It refers to the, position of an enterprise in relation to its competitors. To ascertain the market standing, the business, must analyze the market and find out where it stands. The business must state in quantifiable terms the, present and prospective customers and the share of market it can capture. Also business must look upon, things in the light of competition., 4. Productivity, Productivity means the efficiency of a business firm to produce its output. It is ascertained by comparing, the value of output with the value of inputs. Every business must aim at greater productivity by making, the best possible use of scarce resources like men, money, machinery, materials etc. It can be achieved, by employing competent personnel, making fuller utilization of machine capacities, reducing wastage of, materials etc., 5. Physical and financial resources:, Any business requires physical resources, like plants, machines, offices, etc., and financial resources, i.e.,, Sri. Sushanth S Nayak. Department of Commerce, , Page 8
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funds to be able to produce and supply goods and services to its customers. The business enterprise, must aim at acquiring these resources according to their requirements and use them efficiently, ., 6. Social responsibility:, Social responsibility refers to the obligation of business firms to contribute resources for solving social, problems and work in a socially desirable manner., , ROLE OF PROFIT IN BUSINESS, Securing profit is the basic requirement of a business. The profit is the driving force which initiates,, activates, and sustains the efforts of the business man. It is the reward for risk bearing. Profit is, necessary for the survival, growth, prosperity and prestige of the business. Profit is the sun, which, enlighten every corner of the business. Profit making is essential in business due to the following, reasons., 1. Profit is a source of Income: Profit is a source of income and it provides the means for livelihood, for the businessman., 2. Profit is essential for growth and expansion: Profit provide necessary fund for growth and expansion, of business activities. Retention of profit as an internal source of funds is more dependable than external, sources like banks and financial institutions., 3. Profit is the index of business performance: Profit earning ability is considered to be the index of, business success. It measures the performance of the business, 4. Profit is the reward for risk taking: Profit is the reward for the entrepreneur who takes business, risk., 5. Profit enhances prestige: Profit provides economic power and prestige to a business. It improves the, credit worthiness as well as the bargaining strength of the business. A profit making firm can raise funds, on easy terms., 6. Profit Increases the efficiency of business: Good profit earning concerns are in a better position to pay, good salaries and perk to employees. This will motivate the workers and they work hard for the, business. This will improve overall efficiency of the business., , BUSINESS RISK, In simple words risk means the possibility of loss. It can be defined as the chances of loss due to, certain uncertain events in the future. It may be of two types, such as speculative risk and pure risk., Speculative risk – It involves both chances of gain or loss. It arises due to change in demand and, supply, change in taste and habits of customers etc. If the market condition is favourable it will result, in gain, otherwise, loss., Pure risk – It involves the possibility of loss or even no loss. Fire, theft, earthquake, strike etc. are the, examples of pure risks. If such events take place, it may result in loss, non-occurrence of which is, explain absence of loss, instead of gain., NATURE OF BUSINESS RISKS, Nature or characteristics of business risks are as follows:1. Business risks arise due to uncertainties: Uncertainty refers to the lack of knowledge about what is, going to happen in the future. Natural calamities, change in demand and prices, changes in technologies,, government decisions etc. are examples of uncertainty. The outcome of this future event is not known in, advance., 2. Risk is an essential part of every business: In business risk is unavoidable. Risk may vary from business, to business. Risk can be minimized or shared with the help of insurance but can’t be eliminated., 3. Profit is the reward for risk taking: Actually profit is the reward for risk bearing. No risk, no gain is an, age old principle and is applicable to all kinds of business. Greater the risk more is the reward. A, businessman shoulders risks in anticipation of better returns., 3. Risk depends mainly upon the nature and size of business: Nature and size of business very much, determine the degree of risk involved in a business. A large scale business involves more risks than small, Sri. Sushanth S Nayak. Department of Commerce, , Page 9
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scale unit. Similarly, a firm dealing in fashionable items does have high degree of risk than a firm dealing, in essential commodities., , Methods of dealing with risk, 1., 2., 3., 4., , Not to enter high risky transactions., Take precautionary measures like firefighting equipments etc., Take an insurance policy to cover various risks., Take measures like provision for bad debts, investment fluctuation fund etc., , Causes of Business Risk, 1. Natural Causes: It may include damages from flood, fire, earthquake etc., 2. Human Causes: It may arise due to certain human activities, such as theft, bad debt, mistakes,, accidents etc., 3. Economic Causes: It include uncertainties relating to demand for products, competition, price,, change in technology, rise in interest rate, higher taxes etc., 4. Other Causes: Political disturbances, mechanical failures, change in exchange rates, etc. come, under this category., STARTING A BUSINESS – BASIC FACTORS, 1. Selection of line of business – It means the nature and type of business that an entrepreneur, should choose to start his business., 2. Size of the firm – The promoter has to decide the size of business, which may be either small, scale, medium scale or large scale depends on the financial stability, future demand etc., 3. Choice of form of ownership – The promoter must decide whether he wants to start a sole, proprietorship concern, partnership firm, private company, public company, or cooperative, society., 4. Location of business – It must be decided by considering the factors like availability of land,, electricity, water, accessibility to market, transportation, scope for expansion etc. Unscientific, location affects the efficiency and profitability of business., 5. Financing the proposition (Capital needs) – The promoter has to decide about business capital, requirements and also find out the sources of finance. It may include short term or long term, capital requirements, sources like shares, debentures or bank loans, cost of capital (interest or, dividend) etc., 6. Physical facilities – It means the resources used to convert raw material into finished goods,, which includes buildings, machines and equipments, skilled and unskilled workers, good, quality raw materials etc., 7. Plant lay out – A proper arrangement of physical facilities like machines, equipment and, workers will result in reduction of wastages, better use of available space, safety and security, to workers etc. It also increases the profit of the business., 8. Competent and committed work force – A scientific planning must be done by the businessman, in calculating the number of employees (skilled and unskilled) to be appointed in various, positions, and their qualities., 9. Tax planning – Tax planning does not mean non-payment of tax. It means to minimize the taxes, through better planning about location (tax free zones), size of business etc., 10. Launching the enterprise – After completing the above formalities, the entrepreneur can launch, his business by mobilizing necessary resources, starting production process and initiating sales, promotion activities., , SECTION—A (One mark questions), 1.What is Economic activity?, Ans:- Any activity is undertaken with the object of earning money or livelihood is called Economic, Activity., 2.Mention any one type of economic activity., Ans:-Business is one type of economic activity., Sri. Sushanth S Nayak. Department of Commerce, , Page 10
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3.State any one characteristic of Business., Ans:- Dealings in goods and services on a regular basis is one characteristic of Business., 4.Name the economic activity in which people are rewarded with salary or wage for their work., Ans:- Employment is an economic activity in which people are rewarded with salary or wage for their, work., 5.What type of economic activity is the work of a chartered accountant?, Ans:-Profession., 6.Give an example for Extractive industry., Ans:- Mining is an example for Extractive industry., 7.Give an example for Genetic industry., Ans:- poultry farms is an example for Genetic industry., 8.Give an example for Manufacturing industry., Ans:- oil refinery Industry an example for Manufacturing industry., 9.What is Analytical industry?, Ans:- Analytical industry which analyses and separates different elements from the same materials as in, the case of oil refinery.,, 10.What is Synthetical industry?, Ans:- Synthetical industry which combines various ingredients into a new product as in the case of, cement.,, 11.Give an example for processing industry., Ans;-Sugar Industry is an example for processing industry., 12.What is Assembling industry?, Ans:- Assembling industry which, assembles different component parts to make a new product as in the, case of television, car, computer, etc.,, 13.What is Construction industry?, Ans;- Industries are involved in the construction of buildings, dams,, bridges, roads as well as tunnels and, canals are called Construction industry., 14.Name the industry which provides support services to other industries., Ans;- Tertiary industries which provides support services to other industries., 15.State a branch of Commerce., Ans;- (i) trade and (ii) auxiliaries to trade are the branch of Commerce., 16.What is Trade?, Ans;- Buying and selling of goods is termed as trade., 17.State any one auxiliary to trade., Ans;- Banking and Finance is one of auxiliary to trade., 18.Name the auxiliary to trade which provides protection against business risk., Ans:- Insurance will provides protection against business risk, ., 19.State an objective of Business., Ans:- Market standing is one of the objective of Business., 20.State any one characteristic of Business risk., Ans:- Uncertainties is one of the characteristic of Business risk., 21.State any one cause of Business risk., Ans:- Natural causes is oneof the causes of Business risk., Sri. Sushanth S Nayak. Department of Commerce, , Page 11
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SECTION—A (Multiple choices One Mark Questions:), 1.Which of the following does not characterize business activity?, (a)Productions of goods and services, (b)Presence of risk, (c)Sale or exchange of goods and services, (d)Salary or wages, Ans:- (d)Salary or wages, 2.Which of the broad categories of industries covers oil refinery and sugar mills?, (a)Primary, (b)Secondary, (c)Tertiary, (d)None of the above, Ans:- b)Secondary, 3.Which of the following cannot be classified as an auxiliary to trade?, (a)Mining, (b)Insurance, (c)Warehousing, (d)Transport, Ans:- (a)Mining, 4.The occupation in which people work for others and get remunerated in return is known as, (a)Business, (b)Employment, (c)Profession, (d)None of the above, Ans:- (b)Employment, 5.The industry which provide support services to other industries are known as, (a)Primary industries, (b)Secondary industries, (c)Commercial industries, (d)Tertiary industries, Ans:-( d)Tertiary industries, 6.Which of the following cannot be classified as an objective of business?, (a)Investment, (b)Productivity, (c)Innovation, (d)Profit earning, Ans:- (a)Investment, 7.Business risk is not likely to arise due to, (a)Changes in Government Policy, (b)Good Management, (c)Employee dishonesty, (d)Power failure., Ans:- (b)Good Management, , SECTION—B (Two marks questions), 1.What is Business?, Ans:- Business refers to an occupation in which people regularly engage in activities related to purchase,, production and/or sale of goods and services with a view to earning profits., 2.State any two types of Economic activities., Ans:- (i) Business, (ii) Profession are the two types of Economic activities., 3.State any two characteristics of Business., Ans;- Two characteristics of Business are, (i)It is an economic activity:, (ii) It Dealings in goods and services on a regular basis:, Sri. Sushanth S Nayak. Department of Commerce, , Page 12
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4.How is business different from profession?, Ans:- Provision of goods and services to the public for earning profit is called Business whereas rendering, of personalised expert services to the public and received professional fees are called Profession., 5.What is Employment?, Ans:- Employment refers to the occupation in which people work for others and get remunerated in, return., 6.What is Industry?, Ans:- Industry refers to economic activities which are connected with conversion of resources into useful, goods., 7.What is Extractive industry?, Ans;- Industries which are extract or draw out products from natural sources are called Extractive, industry. They supply some basic raw materials that are mostly products of geographical or natural, environment., 8.Give the meaning of Genetic industry., Ans:- Industries which are engaged in breeding plants and animals for their use in further reproduction, are called Genetic industry., 9.What is manufacturing industry?, Ans:- Industries which are engaged in producing goods through processing of raw materials and thus, creating form utilities are called manufacturing industry., 10.What is commerce?, Ans;- All activities involving the removal of hindrances in the process of exchange of goods and services, are called commerce., 11.State the two types of activities of commerce., Ans:- (i) Trade and (ii) Auxiliaries to trade are two types of activities of commerce., 12.What are Auxiliaries to trade?, Ans:- Activities which are meant for assisting trade are known as auxiliaries to trade., 13.State any two auxiliaries to trade., Ans;- (i) Transport and Communication: and (ii) Banking and Finance: are regarded as two types of, auxiliaries to trade., 14.State any two objectives of Business., Ans;- (a) Market standing and (b) Innovation are two objectives of Business., 15.What is Business risk?, Ans;- Possibility of inadequate profits or even losses due to uncertainties or unexpected events are called, Business risk., 16.Mention any two characteristics of Business risks., Ans:- Two characteristics of Business risks are, (i)Business risks arise due to uncertainties, (ii) Risk is an essential part of every business, 17.Mention any two causes of Business risks., Ans:- Natural causes like flood, earthquake, lightning, heavy rains and Human causes like dishonesty,, carelessness or negligence of employees are two causes of Business risks., 18.State any two factors to be considered while starting a business., Ans:- (i)Selection of line of business and (ii) Size of the firm are two factors to be considered while, starting a business., , Sri. Sushanth S Nayak. Department of Commerce, , Page 13
