Unit 1: Introduction To Business and Business Forms
Unit 1: Introduction To Business and Business Forms
Nature of business
1. Economic activity: business is an economic activity function as it involves production
and distribution of goods and services for the satisfaction of human being. However,
business operates in a society and it reflects the norms and values of people.
3. Dealing in goods and services: Every business organization deals in goods and services.
Goods production and sold goods may be of consumer goods such as clothes, shoes, milk
etc. capital goods such as materials, tools and machinery etc. services includes drinking
water, electricity, tele-communication
5. Risk and Uncertainty: All business activities involve some element of risk and
uncertainty. There is no certainty that business should be always result into profit.
Change in the taste of consumers change is demand of goods and services, pricing, policy
of government etc. are the few reasons for the risk and uncertainty.
6. Profit motive: The primary objective of every business is to earn profit. Profit motive
makes continuity in the business. Profit is also important for the growth and development
of the business.
7. Consumer satisfaction: A business organization most satisfy its customers. Customers
satisfaction is the prime objective of any business.
8. Creation of utility: Business creates various types of utility. For example, form utility,
place utility and time utility it produces goods and services supplies there to consumer at
reasonable price.
Scope of Business
Industry Commerce
a. Home or internal trade: Home trade consists of buying and selling of goods within the
boundaries of a country and the payment for the same is made in national currency.
Home trade may be further sub-classified into wholesale trade and retail trade.
b. Foreign or external trade: Foreign or external trade refers to buying and selling of
goods and services between two or more countries. In foreign trade, a businessman is one
country buys from or sells to another businessman in a different country.
2. Business service: The term business service means subsidiary activities which facilities
business organization. Banking, insurance, warehousing, transport, service activities.
a. Banking: Banks and other financial institutions provide financial assistance and
credit facilities to business organization. Banks are also facilities business activities
by providing remittance to the business organization.
b. Transportation: It provides the function of carry goods from producer to trader and
finally to consumers. Quick and economically means of transport such as roadways,
airways, and ropeways have widened the scope of trade to include transaction.
c. Insurance: Business involves several types of risks. These can be covered with the
help of insurance. Insurance company undertake to make good the loss to traders to
payment of insurance premium.
d. Warehousing: It refers to the holding of goods until they are finally consumed.
Goods have to be stored at every stage in the process of exchange. Warehousing
performs a useful function by matching supply with demand.
e. Communication: It gives information of new product to individuals and business
community, telephone, letter correspondence, newspaper, radio, TV etc. the
importance means of communication. These services facilitates, the business
transactions and help in the improvement of efficiency.
Objective of business:
Every business has objectives and goals. Objectives of business means the purpose for which the
business is established to run. Objective of business can be classified into three broad categories.
They are:
1. Economic objective
2. Social objective
3. Human objective
Economic objective: Business is primarly a economic activity, and therefore, its objective is to
show economic outcomes. The economic objective of business mainly includes the following:
i. Earning profit: Profit earning is the fundamental economic objective of business. Profit is
an absolute necessity for every business enterprises. Profit is necessary to provide
adequate return on capital, to provide funds for innovation and growth. And to provide
better working conditions to the employees.
ii. Creating customer: The business can survive only if there is demand for its goods and
services. It must create new customers and satisfy their needs. Continuous search for new
customers is necessary for earning adequate profits.
iii. Innovation: In these days of competition, innovation is the soul of business. Innovation
means research and development activities. It involves changes in management,
production, selling, servicing method of personnel and accounting etc.
iv. Optimum utilization of resources: Every business is expected to make the best use of
men, machine and materials which are considered to be scarce resources. This objective
can be achieved by employing efficient personnel, making full use of machines and
reducing wastage of materials and financial resources.
Social Objective: Business is a part of society and services in the society. It can, thus, achieve
its economic objective only by having deep roots in the society. Business should meet the
various aspirations and social needs of the society. The social objective of business are as
follows:
i. To provide better quality goods and services at reasonable prices to the customers.
ii. To provide employment opportunities for the society.
iii. To pay taxes to the government honestly
iv. To provide fair return to the investors
v. To follow socially desirable and fair trade practices.
Human Objective: The human objective of business are as follows:
i. Fair remuneration to employees
ii. Sympathy towards employee/workers
iii. Satisfactory working conditions for them
iv. Employees/workers participation
v. Profit sharing to the workers.
vi. Better quality goods at reasonable prices to the customers.
vii. Handsome return to investors on their investments.
Business as a system
Business as a system is a combination of business commerce, occupations, and
organizations that produces and distributes the goods and services that create value for
people in a society.
A business system is an organized or complex or whole, combination of things or parts
forming a complex or unitary whole.
A business system is an established arrangement of components which leads to the
attainment of particular objective according to plan.
The system in business includes: Input, process and output.
Business system can be a system of task and authority relationship that coordinates and
controls the interactions between people so that they work toward a common goal.
Partnership: Meaning
Partnership is an association of two or more persons who agree to combine their financial and
managerial abilities to run a business. Persons who have entered into partnership are individually
called partners and collectively known as a firm.
Sharing of Profit Sole trader enjoys the entire profit Profit is shared among the partners
in Profit Sharing Ratio
Risk Bearing Sole trader bears all the risk Risk is borne jointly and
individually by all the partners
Secrecy Business secrets are not open Business secrets are open to partners
Decision Making Quick Decision making Delayed decision making
Cooperative organization
Co-operative organization is the form of organization where in persons voluntarily
associate together as business being a basis of equality for promotion of economic
interest of themselves.
It is established for economical and social development of weaker section of the society.
The associations can be registered under Nepal Cooperative Act, 2048. The concept of
cooperatives was developed to minimize the economic and social imbalances caused
by industrial revolution. Economic hardships and exploitations suffered by labour and
other weaker section of society compelled them to think of mutual help in order to better
their economic conditions. This led to worldwide cooperative movement in various
fields, such as consumer cooperative in Nepal