explain the characteristics of business

It will be noted that all business activities are, directly or indirectly, concerned with the transfer or exchange of goods, and services for value. (b) It involves exchange, sale, purchase of goods and services for mutual profit through the satisfaction of human wants. Thus, every business enterprise either manufactures the goods (pen, textbook, furniture, etc.) For example, post demonetisation the real estate business was adversely affected as the monthly average housing sale fell by 40% in major cities. Following are the basic characteristics of a business organization: Since the main function performed by a business enterprise is to provide goods for customer satisfaction for a price, the supply of goods becomes essential. It is a source of income for business persons and a source of finance for meeting expansion requirements of business. Goods are those products which are in physical form like vehicles, fruits, etc. Share Your PPT File, Characteristics of Business – 10 Characteristics: Dealings in Goods and Services, Profit Motive, Risk, Creation of Utilities, Economic Activity, Social Institution and a Few Others, Business involves a series of dealings. Your email address will not be published. This will be true even of Government-run business in the long run. Profit motive is the basic feature of business. If goods are produced for self consumption and not for selling purpose, it cannot be called a business activity Cooking food at home for the family is not business, but cooking food and selling it to others in a restaurant is business. Services are intangible in nature. Business is an economic activity which is concerned with providing good and services to the society under the incentive of private gains or profit. Regularity in dealings is one of the key feature of a business activity. For example, if a person sells his car it shall not be a business, but if he starts dealing in cars as his occupation the sale of car shall be considered business. e.g., if a person sells his/her old washing machine even at a profit, it will not be considered a business activity. 6. T.V., Soaps, etc. to earn profit. There are also uncertainties, such as loss due to change in demand or fall in price cannot be insured and must be borne by the businessman. By producing and supplying various commodities, businessmen try to promote consumer’s satisfaction. -B.O. To that extent, there are certain principles that need to be followed. Buyer and Seller. This distribution function of business involving multiple activities creates two types of utilities: Goods and services need to be transported to the places where these are needed. Exchange – Business involves exchange of goods and services for money or money’s worth. Thus, one essential characteristic of business is that there should be sale or exchange of goods or services between the seller and the buyer. For example, Ved, a computer professional makes a power point presentation as a part of his daughter’s project work. Though business aims at profits, losses are quite possible and common. Prof. L.R. In order to be called a business enterprise, the activities must be continuous. (v) Profit Earning One of the main objectives of business is to earn profit. Services are intangible and invisible like electricity, gas, insurance, transportation, banking, etc. Services like gas, electricity, water, insurance, transportation are known as invisible or intangible goods. Moreover an entrepreneur setting up a business expects some return on his investment. This website uses cookies to improve your experience. A single transaction involving buying and selling does not become business. A Business cannot exist without an Entrepreneur and hence is called an “Enterprise”. The person who identifies the need and undertakes to carry on the various activities to earn desired rewards and is willing to bear the risk of any adverse developments is an Entrepreneur. for an economic motive. Business influences the various elements of the society which, in turn, affect busi­ness. Goods are graded, stored, and put in warehouse or cold storage plant, to save them from getting perished, to make things available for consumption throughout the year. Profit is the biggest stimulus for maintaining the continuity of business. Sale, Transfer or Exchange 2. Goods produced or acquired for personal consumption, however, do not fall within the scope of business. Therefore, one single transaction of sale or purchase does not constitute business. The profit earned by the businessmen serves as a source of income/livelihood for them. Hence, in addition to the basic features mentioned above, modern businesses have some additional features too. The risks are related with certain factors like changes in consumer tastes and fashions, changes in methods of production, strike or lockout in the work place, increased competition in the market, fire, theft, accidents, natural calamities, etc. No business can sustain for long if it does not make profit. When goods are exchanged for money’s worth, it is called monetary exchange. Goods involve consumer goods such as clothes, shoes, etc. Businessmen maximise profits, by increasing the volume of sales or reducing costs. A single transaction, cannot be called business, recurring purchase and sale is the hallmark of business, For. 12. (vi) Uncertainty of Return Uncertainty of return refers to the lack of surety relating to the amount of money that the business is going to earn in a given period. The ability of a business to react as per the changing situation is known as adaptability. A businessman regularly deals in a number of transactions and not just one or two transactions. For instance, if a person sells his motor car and makes a profit, it does not amount to business. Dicksee defines Business as “a form of activity pursued primarily with the object of earning profits for the benefit of those on whose behalf the activity is conducted. For example, the nature of a business named “J K Traders” would be to buy and sell some items in which they trade. Share Your PDF File For example, a teacher when teaches in a coaching institute on payment, it is business. Business primarily deals with goods and services. The presence of entrepreneur is essential in any business which may be operated on a small or on a large scale. On the other hand, when goods exchanged for some other goods is called Barter Exchange. Production of several goods is seasonal but their demand remains throughout the year. Risk is present in every business due to uncertainty associated with it, as a result of happening of some unfavourable or undesirable event. Production or Procurement of Goods and Services: Business exists to satisfy the wants of the consumers. Social Objectives – Business cannot exist solely to earn profits. Whereas, the moment it is transported to other state/ places where people need, it creates place utility. Business activities are carried on to earn profit and generate wealth. Modern business is service oriented. This is done by making goods and services more useful and suitable, making available at place of requirement and at time when demanded to satisfy human wants. A producer passes on or transfers the title of the product to the one who pays for it. But if he sells scooters on regular basis as its dealer, it will become business. Content Guidelines 2. It is the hope of making money that induces people to go into business. Hence, profit is a reward for individuals’ ability or efficiency of the enterprises and also for the service that he renders to the community. 2. For example, Farhan had to incur huge losses in business as a fire broke out in his restaurant due to a short circuit. Although business activities also affect social outlook, values, attitudes, customers, way of think­ing etc. 1. Growth and Expansion: Business is started by an entrepreneur with an intention of rapid growth and expansion. It arises out of the uncertainty that goes with the profit expected from a business activity. Before an activity can be called business there must, therefore, exist not only the goal of profit but the risk of loss. Every business is carried on with the purpose of earning money and acquiring wealth. – Stenford. First, businesses must be the result of individuals working together in an organized way.

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