Nature And Purpose of Business

 

  1. Trade : Refers to buying and selling of goods and services with the objective of earning profit. It is classified into two categories.

    i) Internal Trade :- Takes place within a country. Internal trade is classified into two categories.

    ii) Retail Trade :- Refers to buying of goods and services in relatively small Quantities and selling them to the ultimate consumers.

  2. External Trade :- between two or more countries. External trade can be classified into three categories.

    1. Import Trade :- If goods are purchased from another country, it is called import trade.

    2. Export Trade :- If goods are sold to other countries it is called export trade.

    3. Entrepot Trade :- Where goods are imported for export to other countries e.g. Indian firm may import some goods from America and export the same to Nepal.

  3. Auxiliaries to Trade :- All those activities which help in removing various hindrances which arise in connection with the production and distribution of goods are called auxiliaries to trade. An overview of these activities is given below.

    1. Transportation and Communication :- The production of goods takes place at one place where as these are demanded in different parts of the country. The obstacle of place is removed by the transport. Along with transport communication is also an important service. It helps in exchange of information between producers, consumers and traders. The common communication services are postal service, telephone, fax, internet etc.

    2. Banking and Finance :- Business needs funds for acquiring assets, purchasing raw materials and meeting other expenses. Necessary funds can be obtained from a bank.

    3. Insurance :- It provides a cover against the loss of goods, in the process of transit, storage, theft, fire and other natural calamities.

    4. Warehousing :- There is generally a time lag between the production and consumption of goods. This problem can be solved by storing the goods in warehouses.

    5. Advertising :- Advertising brings goods & services to the knowledge of prospective buyers. It is through advertising that the customers come to know about the new products and their utility.

      6. Basis Industry Commerce Trade
      Meaning Production of good & services Distribution of goods & services Buying and selling of goods and services
      Capital requirement Large amount of capital invested Comparatively lesser Invested capital Less capital depending on the nature of business
      Scope It includes primary, secondary and services industries It includes trade & auxiliaries to trade

      It includes home and foreign trade
      Risk Involves maximum risk less risk as Compared to industry Least risk involved
      Utility Created form Creates place and time utility Creates possession utility

 

CBSE Business Studies Class XI ( By Mr. Kailash Gururani )
Email Id : [email protected]

Business Studies - Mr. Kailash Gururani

 

 

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