Unit-1 Business Nature and Purpose

 

Unit-1

Business Nature and Purpose

Very Short Answer Type Questions (01 Mark)

Answer in one word/one sentence

Q.No.1The reward received for taking a skin called-

Answer - A reward a businessman receives after bearing the risk of the business is known as profit.

Q.No.2The activities which are done to earn income are called-

Answer - An activity which results in the generation of income or money is called an economic activity.

Q.No.3What is the treatment by a doctor in a hospital called?

Answer - The treatment that a doctor provides in a hospital is called a medical procedure or therapy

Q.No.4What are the Activities not done for the purpose of earning money called?

Answer - Activities that are not done for the purpose of earning money are called non-economic activities. 

Q.No.5What are the Activities done for the purpose of earning money called?

Answer - Activities done to earn money are called economic activities. Some examples of economic activities include: Production of goods, Buying and selling goods, and Rendering specialized services.

Q.No.6What is the main purpose of Economic Activities?

Answer - The main purpose of economic activity is to satisfy people's needs and wants by producing goods and services.

Q.No.7What is the exchange of goods and services for mutual benefit called?

Answer - The exchange of goods and services for mutual benefit is called trade or commerce,

Q.No.8Business an economic activity?

Answer - Yes, business is an economic activity because it involves the production and sale of goods and services to satisfy human needs while earning a living. 

 

Short Answer Type Question(3 Marks)

Q.No.1 Mention any two characteristics of Business.

Answer -Two characteristics of business are: 

ü  Economic activity: A business is an economic activity because it is undertaken to earn money or livelihood. 

ü  Buying and selling: A business involves buying and selling goods and services.

 

Q.No.2 What is meant by Economic and Non-Economic activities?

Answer -Economic activities are actions that involve the production and consumption of goods and services for monetary gain, while non-economic activities are actions that involve providing goods and services to others without the intention of financial gain.

Q.No.3 What is meant by Primary industries?

Answer -A primary industry deals with the extraction of natural resources. Forestry, agriculture, fishing, quarrying, mining, and mineral exploitation are all part of a country's economy. It is thus named because it serves as the foundation for all other items.

Q.No.4 Why should a business serve a social purpose?

Answer -To promote the progress of the society: Business is a part of the society. The society provides a regular market for goods and services of the business apart from factors of production. The progress of the business is linked with the progress of the society.

Q.No.5 Explain the difference between economic and non-economic activities. Any 3.

Answer -

Aspect	Economic Activities	Non-Economic Activities
Definition	Activities undertaken for monetary gain or to satisfy material needs and wants.	Activities performed without any consideration of monetary gain or wealth accumulation.
Purpose	Primarily driven by profit motive or utility maximization.	Driven by social, cultural, or personal motives rather than financial gain.
Exchange	Often involves the exchange of goods, services, or money.	Usually doesn't involve exchange or has no monetary value attached.
Measurement	Can be quantified in monetary terms (e.g., revenue, GDP).	Often difficult to quantify in monetary terms.
Examples	Production, consumption, trade, investment, employment.	Volunteer work, hobbies, leisure activities, social interactions.

Q.No.6 Write the characteristics of the profession. Any 3.

Answer -The following are the common characteristics of a profession:

 (i) It demands possession of a body of specialised knowledge and extended practical training.

(ii) It renders an essential social service.

(iii) It demands continuous in service training of its members.

 (iv) It has a clearly defined membership of a particular group with a view to safe- guarding the interests of the profession.

(v) It involves a code of ethics.

Q.No.7 Explain the concept of Business Risk.

Answer -Business risk is the possibility that a company may experience financial loss or other damage that could affect its ability to achieve its goals. Business risk can be caused by a number of factors, both internal and external, and can include:

ü  Financial risks

ü  Operational risks

ü  Environmental risks

ü  Cyber risk

ü  Inflation

ü  Supply chain disruptions

 

Q.No.8 Explain the Auxiliary to Trade

Answer -Auxiliaries to trade are business activities that help trade by facilitating the transfer of goods and services. They are essential for the smooth functioning of international trade, and can help businesses overcome challenges such as logistics, finances, and regulations.

 

Long Answer Type Question (5 Marks)

Q.No.1 Explain the characteristics of business.

Answer -Five characteristics of business: 

ü  Economic activity: A business is an economic activity that is undertaken to earn money or livelihood. 

ü  Production or procurement of goods and services: A business either manufactures goods or acquires them from producers. 

ü  Sale or exchange of goods and services: A business involves transferring or exchanging goods and services for value. 

ü  Continuous process: A business is a continuous process of production and distribution of goods and services. 

ü  Profit motive: The primary objective of business is earning profit. 

 

Q.No.2 Explain different types of industries with examples. Any 5

Answer -Industries can be categorized in many ways, including by their role in the economy, their ownership, and their type of product: 

ü  Primary industries: These industries extract natural resources from the earth, such as agriculture, fishing, forestry, and mining. 

ü  Secondary industries: These industries use raw materials from primary industries to create finished goods, such as food manufacturing, textile manufacturing, electronics, cars, and clothing. 

ü  Tertiary industries: Also known as the service sector, these industries provide services to businesses and consumers, such as banking, transport, retail, entertainment, and financial services. 

ü  Heavy industries: These industries include steel production, mining, and aerospace. 

ü  Light industries: These industries include textiles, food processing, and electronics. 

 

Q.No.3 Write the causes of Business Risks.

Answer -Following are the types of business risk:

1. Strategic Risk: Strategic risks are such that can happen to a business at any time. This could be due to the change in customer preferences. Hence, businesses need to have a real time feedback system for recognising customer feedback.

2. Compliance Risk: Compliance risk relates to the risk that arises from the changing rules by a regulatory body or government that a company needs to adjust accordingly and implement the same in their operations.

3. Financial Risk: Financial risk is related to the financial health of the business. It relates to the companies ability to carry on operations in case of non-payment by some clients.

4. Operational Risk: Operational risk is where there is a risk arising from the execution of the processes or operations of the business. It can be due to sudden breakdown of machinery or the system which can result in delay in operations, that can be detrimental to the business.

 

Q.No.4 Differentiate between business and profession. Any 5

Answer -

Business	Profession
Primarily driven by profit and revenue generation	Focused on specialized knowledge and expertise
Involves trade, production, or provision of goods/services	Centers around the delivery of specialized services
Entrepreneurial in nature, with a focus on ownership and management	Emphasizes individual skill development and professional growth
Greater control and autonomy over decision-making	Subject to professional standards, ethics, and regulations
Involves risks and uncertainties in the market	Relatively stable and predictable income

 

 

Q.No.5  Differentiate between trade, industry and commerce. Any 5

Answer -

INDUSTRY	COMMERCE	TRADE
1.Meaning: Extraction, reproduction, conversion, processing, and construction of useful products	Activities involving the distribution of goods and services	Purchase and sale of goods and services
2. Scope: Consists of all activities involving the conversion of materials and semi-finished products into finished goods.	Comprises trade auxiliaries to trade	Comprises exchange of goods and services
3. Capital: Generally large amount of capital is required.	The need for capital is comparatively less	Small capital is needed to maintain stock and to grant credit
4. Risk: The risk involved is usually high.	Relatively less risk is involved	Relatively less risk is involved
5. Side: It represents the supply side of goods and services.	It represents the demand side of goods and services	It represents both supply and demand
6. Utility creation: It creates form utility by changing the form or shape of materials.	It creates place utility by moving goods from producers to consumers	It creates possession utility through the exchange

 

Q.No.6 Describe the various function of business. Any 5

Answer -Core business functions are five key areas that you must execute in addition to your primary function. They are human resources, finance, marketing, sales, and strategy. These are universal functions,  which means that they are necessary for the success of any business.

Human Resources

HR is the function of building and maintaining a successful team of employees who have the skills and experience to achieve the company’s primary and core functions.

Finance

Finance is the function of handling the company’s money. This core function exists to ensure that the business spends and invests money properly so that it can continue to operate successfully.

Marketing

ü  Every business needs its target audience to:

ü  Know that it exists

ü  Understand what it does

ü  Regard it as being trustworthy

ü  View it as a provider of products or services they need

ü  The core function of marketing creates brand awareness and engages potential customers.

Sales

Ultimately, all businesses have products or services to sell. The sales function helps prospective customers see the benefits and features of products and services and then make a purchase.

Strategy

The strategy function involves all of the necessary planning required for growth and success. This function is what businesses use to make choices on product development and workforce planning. Strategy helps ensure that a business has a plan for the future and can remain competitive.