PU1: Business Studies Chapter 1 Solutions

Chapter 1 Business, Trade and Commerce

One mark questions

1. What is Economic activity?

Ans. Economic activities are those by which we can earn our livelihood.

For example, a worker working in a factory, a doctor operating in his clinic, etc.

2. Mention any one type of economic activity.

Ans. A worker working in a factory.

Also a doctor operating in his clinic,a manager working in an office and a teacher teaching in a school (any one can be written)

3. What is Hundi?

Ans. Hundi is an instrument of exchange, which was prominent in the Indian subcontinent in the pre-independence period. It involved a contract which — (i) warranted the payment of money, the promise or order which is unconditional

(ii) was capable of exchange through transfer by valid negotiation.

4. What is Maritime trade? (not in textbook)

Ans. Maritime trade is the kind of trade that involves the transport of goods through the sea, using ships. Maritime trade was an important branch of global trade network in ancient India,

5. State any one characteristic of Business.

Ans. 1. Business is an economic activity.

Also

2. Business involves production or procurement of goods and services

3. Business involves sale or exchange of goods and services

4. Business involves dealings in goods or services on a regular basis

5. One of the main purpose of business is to earn income by way of profit.

6. There is uncertainty of return in business

7. There is possibility/element of risk in business.

(any one can be written)

6. Name the economic activity in which people are rewarded with salary or wage for their

work.

Ans. Employment.

7. What type of economic activity is the work of a chartered accountant?

Ans. Profession.

Note : A work of a CA can be both profession or employment. If he is employed with some firm from where he receives salary as per his contract of employment, then it is employment. But if he is self employed and running his own practice charging professional fee from his clients, then it is a profession.

8. Give an example for Extractive industry.

Ans. Farming.

(Also mining, lumbering, hunting or fishing) (any one can be written)

9. Give an example for Genetic industry.

Ans. Seeds and nursery companies.

Also cattle breeding farms, poultry farms, and fish hatchery (any one can be written)

10. Give an example for Manufacturing industry.

Ans. Oil Refinery.

Also Cement industry, Sugar industry, Paper industry, Television, Car, Computer (any one can be written)

11. What is Analytical industry?

Ans. Analytical industry is a type of manufacturing industry which analyses and separates different elements from the same materials. For example, oil refinery.

12. What is Synthetical industry?

Ans. Synthetical industry is a type of manufacturing industry which combines various ingredients into a new product. For example, cement industry.

13. Give an example for processing industry.

Ans. Sugar industry

also Paper industry (any one can be written)

14. What is Assembling industry?

Ans. Assembling industry assembles different component parts to make a new product, as in the case of television, car, computer, etc

15. What is Construction industry?

Ans. Construction industries are involved in the construction of buildings, dams, bridges, roads as well as tunnels and canals.

16. Name the industry which provides support services to other industries.

Ans. Tertiary industry.

17. State a branch of Commerce.

Ans. Trade

Also Auxiliaries to trade. (any one can be written)

18. What is Trade?

Ans. Trade refers to sale, transfer or exchange of goods. It removes the hindrance of persons by making goods available to consumers from the possession or ownership of producers.

19. State any one auxiliary to trade.

Ans. Transport and communication

Also banking and finance, insurance, warehousing, advertising. (any one can be written)

20. Name the auxiliary to trade which provides protection against business risk.

Ans. Insurance

21. State an objective of Business.

Ans. Earning Profits.

Also 1. Improving market standing in relation to competitiors by offering competitive products to the satisfaction of consumers.

2. Innovation in product/services offered to the customers and innovation in skills and activities to provide those goods and services so as to flourish in a competitive world.

3. Ensure greater productivity through the best use of available resources.

4. Acquisition and efficient use of physical and financial resources.

5. Manager performance and development.

6. Positive worker attitude and performance to increase productivity and profitability of the enterprise.

7. Social Responsibility.

(any one can be written)

22. State any one characteristic of Business risk.

Ans. Business risks arise due to uncertainties

Also

2. Risk is an essential part of every business.

3. Degree of risk depends mainly upon the nature and size of business:

4. Profit is the reward for risk taking: ‘

(any one can be written)

23. State any one cause of Business risk.

Ans. Natural Causes. For example, flood, earthquake,lightning, heavy rains, famine, etc

Also

2. Human Causes like dishonesty, carelessness or negligence of employees, stoppage of work due to power failure, strikes, riots, management inefficiency, etc.

3. Economic Causes. For example uncertainties relating to demand for goods, competition, price, collection of dues from customers, change of technology or method of production and Financial problems, like rise in interest rate for borrowing, levy of higher taxes, etc.

4. unforeseen events, like political disturbances, mechanical failures, such as the bursting of boiler, fluctuations in exchange rates, etc

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

(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

(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

(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

(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

(d) Tertiary industries

Ans. (d) Tertiary industries

6. Which of the following cannot be classified as an objective of business?

(a) Investment

(b) Productivity

(d) Profit earning

Ans. (a) Investment

7. Business risk is not likely to arise due to

(a) Changes in Government Policy

(b) Good Management

(d) Power failure

Ans. (b) Good Management

Two marks questions

1. List any two major exports in ancient India.

Ans. 1. Spices

2. Wheat

Also sugar, indigo, opium, sesame oil,cotton, parrot, live animals and animal products—hides, skin, furs, horns,tortoise shells, pearls, sapphires,quartz, crystal, lapis, lazuli, granites, turquoise and copper.

(any two can be written)

2. List any two major imports in ancient India.

Ans. 1. Horses

2. Chinese Silk

Also animal products, Chinese flax and linen,wine, gold, silver, tin, copper, lead, rubies, coral, glass, amber (any two can be written)

3. 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.The activity may consist of production or purchase of goods for sale, or exchange of goods or supply of services to satisfy the needs of other people.

4. State any two types of Economic activities.

Ans. 1. Business

2. Profession

Also 3. Employment (any two can be written)

5. State any two characteristics of Business.

Ans. 1. Business is an economic activity.

2. Business involves production or procurement of goods and services

Also

3. Business involves sale or exchange of goods and services

4. Business involves dealings in goods or services on a regular basis

5. One of the main purpose of business is to earn income by way of profit.

6. There is uncertainty of return in business

7. There is possibility/element of risk in business.

(any two can be written)

6. How is business different from profession?

Ans.

Basis	Business	Profession
1. Mode of establishment	Entrepreneur’s decision and other legal formalities, if necessary	Membership of a professional body and certificate of practice
2. Nature of work	Provision of goods and services to the public	Rendering of personalised, expert services

Also

3. Qualification	No minimum qualification is necessary	Qualifications, expertise and training in specific field as prescribed by the professional body is a must
4. Reward or return	Profit earned	Professional fee
5. Capital investment	Capital investment required as per size and nature of business	Limited capital needed for establishment
6. Risk	Profits are uncertain and irregular; risk is present	Fee is generally regular and certain; some risk
7. Transfer of interest	Transfer possible with some formalities	Not possible
8. Code of conduct	No code of conduct is prescribed	Professional code of conduct is to be followed
9. Example	Shop, factory	Legal, medical profession, chartered accountancy

Any two can be written

7. What is Employment? (not in textbook)

Ans. Employment is an economic activity under which a person (employee), renders a service to another person (employer), under a contract of employment, in return for salaries or wages.

For example, jobs in banks, insurance companies and government departments.

8. What is Industry?

Ans. 1. Industry refers to economic activities, which are connected with conversion of resources into useful goods. Generally,the term industry is used for activities in which mechanical appliances and technical skills are involved, for example, activities relating to producing or processing of goods, as well as,breeding and raising of animals.

2. The term industry is also used to mean groups of firms producing similar or related goods. For example, cotton textile industry refers to all manufacturing units producing textile goods from cotton.

9. What is Extractive industry?

Ans. Extractive industries are primary industries that extract or draw products from natural sources. For example, farming, mining, lumbering, hunting or fishing.

10. Give the meaning of Genetic industry.

Ans. Genetic industry are primary industry that are engaged in breeding plants and animals for their use in further reproduction. For Example seeds and nursery companies, cattle breeding farms, poultry farms, and fish hatchery.

11. What is manufacturing industry?

Ans. Manufacturing industry are engaged in producing goods through processing of raw materials. They create form utility. They are divided into four categories

1. Analytical Industry. For example oil refinery

2. Synthetical Industry. For example Cement Industry

3. Processing Industry For example Paper industry

4. Assembling Industry. For example television, car, computer,etc.

12. What is commerce?

Ans. Commerce embraces all those activities, which are necessary for maintaining a free flow of goods and services. It provides the necessary link between producers and consumers. Thus, all activities involving the removal of hindrances in the process of exchange are included in commerce.

It includes (a) buying and selling of goods i.e., trade, and

(b) auxiliaries to trade , such as transport, banking, etc.

13. State the two types of activities of commerce.

Ans. Commerce includes two types of activities.

(i) trade and

(ii) auxiliaries to trade

14. What are Auxiliaries to trade?

Ans. Activities that are required to facilitate trade i.e purchase and sale of goods are called services or auxiliaries to trade. They include transport, banking, insurance, communication, advertisement, packaging and warehousing.

15. State any two auxiliaries to trade.

Ans. Refer to Q19 of 1 mark Questions. (any two can be written)

16. State any two objectives of Business.

Ans. Refer to Q21 of one mark questions. (any two can be written)

17. What is Business risk?

Ans. Business risks refers to the possibility of inadequate profits or even losses due to uncertainties or unexpected events. For example, demand for a particular product may decline due to change in tastes and preferences of consumers or due to increased competition from other producers.

Business risks are of two types:

1. Speculative risk

2. Pure risk.

18. Mention any two characteristics of Business risks.

Ans. 1. Business risks arise due to uncertainties: Uncertainty refers to the lack of knowledge about what is going to happen in future. Natural calamities, change in demand and prices, changes in government policies and prices, improvement in technology, etc.,are some of the examples of uncertainty which create risks for business because the outcomes of these future events are not known.

2. Risk is an essential part of every business: Every business has some risk. No business can avoid risk, although the amount of risk may vary from business to business. Risk can be minimised, but cannot be eliminated.

Also

3. Degree of risk depends mainly upon the nature and size of business: Nature of business (i.e.,type of goods and services produced and sold) and size of business (i.e., volume of production and sale) are the main factors which determine the amount of risk in a business. For example, a business dealing in fashionable items has a high degree of risk. Similarly, a large-scale business generally has a higher risk than what a small scale has.

4. Profit is the reward for risk taking: ‘No risk, no gain’ is an age-old principle which applies to all types of business. Greater the risk involved in a business, higher is the chance of profit.

(any two can be written)

19. Mention any two causes of Business risks.

Ans. Refer to Q23 of one mark questions. (any two can be written)

20. State any two factors to be considered while starting a business.

Ans. Two factors to be considered while starting a business are:

1. Selecting the nature and type of business to be undertaken.

2. Size of the firm or scale of its operations.

Also 3. Choice of form of ownership

4. Location of business enterprise

5. Financing the proposition, i.e providing for necessary capital for starting, as well as, for continuing the proposed business.

6. Availability of physical facilities, including machines and equipment, building and supportive services

7. drawing the plant layout / plan showing the arrangement of the physical facilities.

8. Availability of competent and committed workforce to perform various activities so that physical and financial resources are converted into desired outputs.

9. Tax liability under various tax laws and its impact on business decisions.

10. Launching of the enterprise by mobilising various resources, fulfilling necessary legal formalities, starting the production process and initiating the sales promotion campaign.

Four marks questions

1. List any four major commercial cities of ancient India.

Ans. In ancient India, there were all kinds of towns—port towns, manufacturing towns, mercantile towns, the sacred centres, and pilgrimage towns.

Some of the major commercial cities were:

1.Pataliputra: Known as Patna today. It was not only a commercial town, but also a major centre for export of stones.

2.Peshawar: It was an important exporting centre for wool and for the import of horses. It had a huge share in commercial transactions between India, China and Rome in the firstcentury A.D.

3.Indraprastha: It was the commercial junction on the royal road where most routes leading to the east, west, south and north converged.

4. Mathura: It was an emporium of trade and people here subsisted on commerce. Many routes from South India touched Mathura and Broach.

Also

5. Varanasi: It was well placed as it lay both on the Gangetic route and on the highway that linked North with the East. It grew as a major centre of textile industry and became famous for beautiful gold silk cloth and sandalwood workmanship. It had links with Taxila and Bharuch.

6. Mithila: The traders of Mithila crossed the seas by boats, through the Bay of Bengal to the South China Sea,and traded at ports on the islands of Java, Sumatra and Borneo. Mithila established trading colonies in South China, especially in Yunnan.

7. Ujjain: Agate, carnelian, muslin and mallow cloth were exported from Ujjain to different centres. It also had trade relations through the land route with Taxila and Peshawar.

8. Surat: It was the emporium of western trade during the Mughal period. Textiles of Surat were famous for their gold borders (zari). It is noteworthy that Surat hundi was honoured in far off markets of Egypt and Iran.

9. Kanchi: Today known as Kanchipuram, it was here that the Chinese used to come in foreign ships to purchase pearls, glass and rare stones and in return they sold gold and silk.

10. Madura: It was the capital of the Pandayas who controlled the pearl fisheries of the Gulf of Mannar. It attracted foreign merchants, particularly Romans, for carrying outoverseas trade.

11. Broach: It was the greatest seat of commerce in Western India. It was situated on the banks of river Narmada and was linked with all important marts by roadways.

12. Kaveripatta: Also known as Kaveripatnam, it was scientific in its construction as a city and provided loading, unloading and strong facilities of merchandise. Foreign traders had their headquarters in this city. It was a convenient place for trade with Malaysia, Indonesia, China and the FarEast. It was the centre of trade for perfumes, cosmetics, scents, silk, wool,cotton, corals, pearls, gold and precious stones; and also for ship building.

13. Tamralipti: It was one of the greatest ports connected both by sea and land with the West and the Far East. It was linked by road to Banaras and Taxila.

(any four can be written)

2. Explain briefly any four characteristics of 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. The activity may consist of production or purchase of goods for sale, or exchange of goods or supply of services to satisfy the needs of other people.

From the above definition, the following chracteristics may be summarised for business.

1. Business is an economic activity: Business is undertaken with the objective of earning money or livelihood and not out of love,affection, sympathy or any other emotion. It can be undertaken either on small and individual level.

2. Production or procurement of goods and services: Every business enterprise either manufactures the goods it deals in or acquires them from producers, to be further sold to consumers or users.

Goods may consist of

(a) consumable items of daily use, (example, sugar, ghee, pen, notebook, etc.,) or

(b) capital goods, like machinery, furniture,etc.,

Services may include facilities offered to consumers, business firms and organisations in the form of transportation, banking, electricity, etc.

3. Sale or exchange of goods and services: Directly or indirectly, business involves transfer or exchange of goods and services for value. It means that if goods are produced not for the purpose of sale but for personal consumption, it cannot be called a business activity. For example, Cooking food at home for the family is not business, but cooking food and selling it to others in a restaurant is business.

4. Dealings in goods and services on a regular basis: One single transaction of sale or purchase, therefore, does not constitute business. For example, if a person sells his/her domestic radio set even at a profit,it will not be considered a business activity. But if he/she sells radio sets regularly either through a shop or from his/her residence, it will be regarded as a business activity.

5. Profit earning: One of the main purpose of business is to earn income by way of profit. That is why, businessmen make all possible efforts to maximise profits, by increasing the volume of sales or reducing costs.

6. Uncertainty of return: It refers to the lack of knowledge relating to the amount of money that the business is going to earn in a given period. Also, there is always a possibility of losses being incurred,dispite the best efforts put into the business.

7. Element of risk: Risk is the uncertainty associated with an exposure to loss. It may be caused by some unfavourable or undesirable event.No business can altogether do away with risks. For example, risk of changes in consumer taste and fashion, changes in method of production, strike or lockout at workplace, increased competition in market, fire, theft, accidents, natural calamities, etc.

(any four can be written)

3. Explain briefly the different types of Manufacturing industries.

Ans. Manufacturing industries are engaged in producing goods through processing of raw materials and, thus, creating form utilities. They bring out diverse finished products, that we consume, or use.

Manufacturing industries may be divided into four categories on the basis of method of operation for production:

1. Analytical industry : It analyses and separates different elements from the same materials. For example, oil refinery.

2. Synthetical industry :whichcombines various ingredients into a new product. For example, cement industry.

3. Processing industry :which involves successive stages for manfucturing finished products, For example, sugar and paper industry.

4. Assembling industry: which assembles different component parts to make a new product, as in the case of television, car,computer, etc.

4. Explain briefly any four auxiliaries to trade.

Ans. Meaning of auxiliaries to trade - Activities which are meant for assisting trade are known as auxiliaries to trade. They are also referred to as services, as these are in the nature of facilitating the activities relating to industry and trade. They help in removing various hindrances which arise in connection with the production and distribution of goods.

Auxiliaries to trade are briefly discussed below:

1.Transport and Communication: Transport helps in the removal of hindrance of place. Production of goods generally takes place in particular locations, but they are required for consumption in different parts of the country. For instance, tea is mainly produced in Assam; cotton in Gujarat and Maharashtra; jute in West Bengal and Odisha; sugar in U.P., Bihar and Maharashtra and so on. This obstacle of place is removed by transpor tthrough road, rail or coastal shipping. Transport facilitates movement of raw material, to the place of production and the finished products from factories to the place of consumption.

Communication helps in exchange of information between producers, traders and consumers.Thus, postal services and telephone facilities may also be regarded asauxiliaries to business activities.

2. Banking and Finance : Banking helps business activities to overcome the problem of finance. Business needs funds for acquiring assets, purchasing raw materials and meeting other expenses. Banks besides providing finance, provide other facilities like collection of cheques, remittance o ffunds to different places, discounting of bills on behalf of traders, etc.

3. Insurance : Insurance covers various kinds of business risks. For example, Factory building, machinery, furniture, etc., must be protected against fire, theft and other risks. Material and goods in stock or in transit are subjectto the risk of loss or damage. Employees are also required to be protected against the risks of accident and occupational hazards. Insurance provides protection in all such cases.

4. Warehousing : Warehousing creates time utility by way of storage facilities. Usually, goods are not sold or consumed immediately after production. They are held in stock to make them available as and when required. Special arrangement must be made for the storage of goods to prevent loss or damage. Warehousing helps business firms to overcome the problem of storage and facilitates the availability of goods when needed. Prices are, thereby, maintained at a reasonable level through continuous supply of goods.

5. Advertising: Advertising helps in providing information about available goods and services, their features, price, etc., to the potential buyers and inducing customers to buy particular items by informing them about the uses, quality, prices, competitive information about those goods and services. Thus advertising helps in sales promotion of the goods and services and brings the manufacturer / supplier and the buyer / customer closer to each other.

(any four can be written)

5. Explain briefly any four objectives of business.

Ans. Business refers to an occupation in which people regularly engage in. They are activities related to purchase, production and/or sale of goods and services with a view to earning profits by satisfying the needs of other people.

Every business is directed to the achievement of certain objectives. Objectives refer to all that the business people want to get in return for what they do.

Some of the objectives of business are:

1. Market standing: Market standing refers to the position of an enterprise in relation to its competitors. A business enterprise must aim at standing on stronger footing in terms of offering competitive products to its customers and serving them to their satisfaction.

2. Innovation: It is the introduction of new ideas or methods in the way something is done or made. It can be (i) innovation in product or services; and

(ii)innovation in various skills and activities needed to supply products and services.

No business enterprise can flourish in a competitive world without innovation. Therefore, innovation is an important objective.

3. Productivity: Productivity is ascertained by comparing the value of output with the value ofinputs. It is used as a measure of efficiency. In order to ensure continuous survival and progress, every enterprise must aim at greater productivity through the best use of available resources.

4. Efficient use and acquisition and use of physical and financial resources: Any business requires physical resources, like plants, machines, offices, etc., and financial resources, i.e., 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.

Also

5. Earning profits: One of the objectives of business is to earn profits on the capital employed. Profitability refers to profit in relation to capital investment. Every business must earn a reasonable profit which is so important for its survival and growth.

6. Manager performance and development: Business enterprises need managers to conduct and coordinate business activity. Various programmes for motivating managers need to be implemented. Manager performance and development, therefore, is an important objective.

7. Worker performance and attitude: Workers’ performance and attitudes determine their contribution towards productivity and profitability of any enterprise. Therefore, every enterprise must aim at improving its workers’ performance. It should also try to ensure a positive attitude on the part of workers.

8. 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.

(any four can be written)

6. Explain briefly the nature/characteristics of business risk.

Ans. Business risks - Refer to Q17 of 2 mark questions.

Nature of business risk Following are the characteristic / nature of business risk

1. Business risks arise due to uncertainties: Uncertainty refers to the lack of knowledge about what is going to happen in future. Natural calamities, change in demand and prices, changes in government policies and prices, improvement in technology, etc.,are some of the examples of uncertainty which create risks for business because the outcomes of these future events are not known.

3. Degree of risk depends mainly upon the nature and size of business: Nature of business (i.e.,type of goods and services produced and sold) and size of business (i.e., volume of production and sale) are the mainf actors which determine the amount of risk in a business. For example, a business dealing in fashionable items has a high degree of risk. Similarly, a large-scale business generally has a higher risk than what a small scale has.

7. Explain briefly the causes of business risks.

Business risks are of two types:

1. Speculative risk

2. Pure risk.

Causes of business risk Following are the causes of business risk

1. Natural Causes. Natural calamities over which human beings have little control. For example, flood, earthquake,lightning, heavy rains, famine, etc

2. Human Causes like dishonesty, carelessness or negligence of employees, stoppage of work due to power failure, strikes, riots, management inefficiency, etc.

4. unforeseen events, like political disturbances, mechanical failures, such as the bursting of boiler, fluctuations in exchange rates, etc.

8. Explain briefly any four factors to be considered while starting a business.

Ans. Meaning of business - Refer to Q3 of 2 mark questions.

Starting a business enterprise is similar to any other human effort in which resources are employed to achieve certain objectives. Some of the basic factors, which must be considered by anybody who is to start the business are as follows.

1. Selection of line business: The first thing to be decided by an entrepreneur is the nature and type of business to be undertaken. The decision will be influenced by the customer requirements in the market and also the kind of technical knowledge and interest the entrepreneur has for producing a particular product as well as the possibility of greater amount of profits.

2. Size of the firm: Size of the firm or scale of its operation is an otherimportant decision to be taken at the start of the business. Some factors favour a large size, whereas, others tend to restrict the scale of operation like expected demand for the proposed product, availability of necessary capital for business, etc.

3. Choice of form of ownership: The choice of the suitable form of ownership (sole proprietorship, partnership, company, etc.) will depend on such factors as the line of business, capital requirements, liability of owners, division of profit, legal formalities, continuity of business, transferability of interest, etc.

4. Location of business enterprise: An important factor to be considered at the start of the business is the place where the enterprise will be located. Any mistake in this regard can result in high cost of production, inconvenience in getting, right kind of production inputs or serving the customers in the best possible way. Availability of raw materials and labour; power supply and services, like banking, transportation, communication, warehousing, etc., are important factors while making a choice of location.

Also

5. Financing the proposition: Financing is concerned with providing the necessary capital for starting, as well as, for continuing the proposed business. Proper financial planning must be done to determine

(a)the requirement of capital,

(b) source from where the capital will be raised and

6. Physical facilities: Availability of physical facilities, including machines and equipment, building and supportive services is an important factor to be considered at the start of the business. The decision relating to this factor will depend on the nature and size of business, availability of funds and the process of production.

7. Plant layout: Plant layout means the physical arrangement of machines and equipment needed to manufacture a product. Once the requirement of physical facilities has been determined, the entrepreneur should draw a layout plan showing the arrangement of these facilities.

8. Competent and committedworked force: Every enterprise needs competent and committed workforce to perform various activities so that physical and financial resources are converted into desired outputs. An entrepreneur must identify the requirement of skilled and unskilled workers and managerial staff. Plans should also be made about how the employees will be trained and motivated to give their best performance.

9. Tax planning: The founder of the business has to consider in advance the tax liability under various tax laws and its impact on business decisions.

10. Launching the enterprise: After the decisions relating to the above mentioned factors have been taken, the entrepreneur can go ahead with actual launching of the enterprise which would mean mobilising various resources, fulfilling necessary legal formalities, starting the production process and initiating the sales promotion campaign.

Eight marks questions

1. What is Business? Explain the characteristics of Business.

Ans. Meaning of Business - Refer to Q3 of 2 mark questions.

Characteristics of business- Refer to Q2 of 4 mark questions

2. Compare business with profession and employment.

Ans.

Basic	Business	Profession	Employment
1. Mode of establishment	Entrepreneur’s decision and other legal formalities, if necessary	Membership of a professional body and certificate of practice	Appointment letter and service agreement
2. Nature of work	Provision of goods and services to the public	Rendering of personalised, expert services	Performing work as per service contract or rules of service
3. Qualification	No minimum qualification is necessary	Qualifications, expertise and training in specific field as prescribed by the professional body is a must	Qualification and training as prescribed by the employer
4. Reward or return	Profit earned	Professional fee	Salary or wages
5. Capital investment	Capital investment required as per size and nature of business	Limited capital needed for establishment	No capital required
6. Risk	Profits are uncertain and irregular; risk is present	Fee is generally regular and certain; some risk	Fixed and regular pay; no or little risk
7. Transfer of interest	Transfer possible with some formalities	Not possible	Not possible
8. Code of conduct	No code of conduct is prescribed	Professional code of conduct is to be followed	Norms of behaviour laid down by the employer are to be followed
9. Example	Shop, factory	Legal, medical profession, chartered accountancy	Jobs in banks, insurance companies, government departments

3. Explain the various types of Industries with examples.

Ans. Meaning of industries - Refer to Q8 of 2 mark questions.

Industries may be divided into the following categories and sub-categories:

A. Primary industries: These include all those activities which are concerned with the extraction and production of natural resources and reproduction and development of living organisms, plants, etc. These are divided as follows.

1. Extractive industries: Refer to Q9 of 2 mark questions.

2. Genetic industries: Refer to Q10 of 2 mark questions.

B. Secondary industries: These are concerned with using materials, which have already been extracted by the primary industries. They process such materials to produce goods for final consumption or for further processing by other industrial units. For example, mining of iron ore is a primary industry, but manufacturing of steel by way of further processing of raw irons is a secondary industry. They are further divided as follows:

1. Manufacturing industries Refer to Q3 of 4 mark questions.

2. Construction Industries: These industries are involved in the construction of buildings, dams, bridges, roads as well as tunnels and canals.

C. Tertiary industries These are concerned with providing support services to primary and secondary industries as well as activities relating to trade. These industries provide service facilities. For example transport, banking, insurance, warehousing, communication, packaging and advertising.

4. Describe the activities relating to commerce.

Commerce includes two types of activities, viz.,

(i) trade and

(ii)auxiliaries to trade

Trade refers to sale, transfer or exchange of goods. It helps in making the goods produced available to the consumers or users.

Trade may be classified into two broad categories – internal and external.

Internal, domestic or hometrade is concerned with the buying and selling of goods and services within the geographical boundaries of a country. This may further be divided into wholesale and retail trade. When goods are purchased and sold in comparatively smaller quantities, for final consumption it is referred to as retail trade.

External or foreign trade consists of the exchange of goods and services between persons or organisations operating in two or more countries. If goods are purchased from another country, it is called import trade. If they are sold to other countries, it is known as export trade.

Entrepot trade is when goods are imported for export to other countries.

Auxiliaries to Trade Refer to Q4 of 4 mark questions.

5. Why does a business need multiple objectives? Explain the objectives of business.

Ans. Meaning of business - Refer to Q 3 of 2 mark questions.

Every business is directed to the achievement of certain objectives. Objectives refer to all that the business people want to get in return for what they do.

Earning profits is one of the major objectives, but not the only one. A business needs multiple objectives. As business enterprises are part of the society, they need to fulfill several objectives, including social responsibility, to survive and prosper in the long run.

Also, since a business has to balance a number of needs and goals, it requires multiple objectives. It cannot follow only one objective and expect to achieve excellence. So, objectives are needed in every area where performance and results affect the survival and prosperity of business. A business enterprise must have multiple objectives to satisfy different individuals and groups. This is essential for its own survival and prosperity.

Some of the objectives of business are: Refer to Q5 of 4 mark questions.

6. Explain the nature and causes of business risks.

Ans. Business risks - Refer to Q17 of 2 mark questions.

Nature of business risk - Refer to Q6 of 4 mark questions.

Causes of business risk - Refer to Q7 of 4 mark questions

7. Explain the factors to be considered while starting a business.

Ans. Meaning of business - Refer to Q3 of 2 mark questions.

Factors to be considered while starting a business - Refer to Q8 of 4 mark questions

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