CHAPTER ONE

“FOUNDATIONS OF BUSINESS AND ECONOMICS”

Q1: Define the term business and why the study of business is important?

Ans: “Business” means the exchange of goods, services or money for mutual benefit or
profit. Business is an economic activity, which is related with continuous and regular produc-
tion and distribution of goods and services for satisfying human wants. Every business
requires some form of investment and enough customers to whom its output can be sold on a
consistent basis in order to make a profit. Businesses can be privately owned, not-for-profit
or state-owned.
We need to study business because it will help us to increase our skills, sharpen our
knowledge and understand the business and economic links among nations. There are some
other reasons for which we study business:

(a) Increasing dependence on others: We have become so independent on others. The

knowledge of business is increasing the understanding of mutual dependence through
business system.

(b) International opportunities: Increasing globalization of business will bring many

opportunities. By studying business, we can know how to start, operate, and sustain business
successfully in the competitive world.

(c) Improving standard of living: Standard of living indicates measure of how well a person
or family is doing in terms of satisfying needs and wants with goods and service. we must
study business to develop our standard of living.

(d) Coping with change: In order to cope with both predictable and unpredictable events we
must have to study business. As it makes easier and less traumatic to cope with unforeseen
events.

(e) Preventing misconceptions: Understanding business also prevents us from accepting

misconceptions, misinformation and inaccurate data as truths.

(f) Utilization of resources: By studding business, we can easily know how to use properly
our resources such as capital resources (raw materials, money) natural resources (oil, natural
gas, water) and human resources (human talent, skills and competence) available in the
nation.
Q2: what are the main objectives of business?

Ans: Business objectives are clearly defined targets that are set by management or business
owners. They give directions and the mode in which the business needs to operate. Every
business enterprise has certain objectives which regulate and generate its activities. Various
objectives of business generally include such factors as Profit, Survival, Growth and Social
responsibility.
A business firm must survive if other objectives are to be accomplished. Growth is an
objective because business does not stand still. Businesses must accept social responsibility
in areas suck as the environment and protection from discrimination. The profit objective
plays a major role in business. Successful business organizations earn a profit because their
goods and services effectively meet customers’ needs and demands.

Q3: Discuss the Bangladesh economy system and identify the characteristics of it?

Ans: An economic system is an accepted way of organizing production, resource allocation

and distribution of goods and service within a society. The economy system of Bangladesh is
called, “mixed economy”; As in Bangladesh public & private sector in the lead of our
economy.
A mixed economy is an economic system that incorporates aspects of more than one
economic system. This usually means an economy that contains both privately-owned and
state-owned enterprises or that combines elements of capitalism and socialism. This system
overcomes the disadvantages of both the market and planned economic systems.

The economic structure of Bangladesh can be divided into the following three sectors:

Primary Sector: With 45% of the workforce is engaged in the primary sector. Agriculture
contributes 14.2% of the country's GDP and enables Bangladesh to achieve its macro-
economic objectives, including food security, poverty alleviation, human resources
development and employment generation. According to the composition of sub sectors, the
crop sector contributes 72% of the production, followed by fisheries at 10.33%, livestock at
10.11% and forestry at 7.33%.

Secondary Sector: This sector mainly comprises of small and medium enterprises that give
employment to 20% of the country’s workforce. It generates 29.2% of the GDP and 40% of
the gross manufacturing output. Bangladesh’s light engineering sector is one of the largest
and most diverse, producing a wide variety of machinery and spare parts. There are several
mills and factories, producing garments, jute and cotton products, paper, textile, etc. Tea
plantation and processing, construction, ferry and transport constitute major manufacturing
industries. ICT has come up as a vibrant sector.
Tertiary Sector: In the last two decades, Bangladesh has seen incredible growth in its
service sector. 35% of the country’s workforce was employed in this sector. Although this
percentage is lesser than the primary, a large part of the country’s GDP comes from service
sector. As of 2017 56.5% of the GDP comes from this sector. The hospitality industry, in
particular, has shown considerable growth. The latest addition to this sector is e-commerce.

Q4: Profits rewards a business enterprise for effectively conducting what kind of activities?

Ans: The difference between business income and business expenses (including all cost of
making and selling products, taxes) is called business profit.

Successful business organization earns a profit because of their goods and services effective-
ly meet customers’ needs and demands. Profits rewards a business enterprise for effectively
conducting these following activities:

Risk-taking: Starting a new business always involves some risk-taking. The business may
earn profit when it takes risks by entering a new market or by competing head-on with
another business. It can potentially cause financial loss, but might also present an opportuni-
ty for a rewarding outcome.

Evaluation of demand: Business organization that evaluates consumer needs and demands
and then move efficiently into a market can earn substantial profits from their organizations.

Efficient management: A major cause of business failure is improper or inadequate

management of people, technology, materials, and capitals. Efficient planning, organizing,
controlling, directing, and staffing can earn satisfactory profits for organizations.
 CHAPTER TWO
“FORMS OF BUSINESS OWNERSHIP”

Q1: What are the main advantages and disadvantages of sole proprietorship?

Ans: Sole proprietorship is a type of business owned and manage by only one person. That
person may receive help from others in operating the business, but is the only boss.

The following are the major advantages of sole proprietorship:

(a) ease of starting, (b)owner’s controls over daily operations and decisions, (c) owner’s sole
rights to profits, (d) use of owner’s abilities, (e) secrecy about business information, (f) tax
breaks and (g) ease of dissolving.

And the major disadvantages are following:

(a) owner’s unlimited liability, (b) difficulty in raising capital, (c) limitations of owner’s
abilities, (d) lack of stability, (e) demands on time, (f)difficulty in hiring and keeping self-
motivated employee.

Q2: Why sole proprietorship is the most popular forms of business ownership?

Ans: A sole proprietorship is basically an unincorporated business owned and run by one
individual, with no distinction between the business and its owner. The ease of starting and
operating a sole proprietorship is one of the reasons this business structure is hugely popular.
As a sole proprietorship is the easiest business structure to form (only need to get a license or
permit and register business with local government). It is also a simple structure to maintain
with few forms and little business administration needed. Also, sole proprietors are relatively
unencumbered by government regulations and can run their business autonomously without
the need to report to partners, shareholders and board members. Sole proprietors have the
benefit of reporting tax on any income earned through their own personal tax return, rather
than filing separately as a business – which can save time and hassle. Sole proprietorship
owners can also cease to operate or close down the business without any legal formalities.
That’s why sole proprietorship is being the most simple and popular forms business
ownership for a long time.
Q3: What are the main advantages and disadvantages of corporations?

Ans: A corporation is a company or group of people authorized to act as a single entity and
recognized as such in law, the corporation is an artificial being, invisible and intangible. It
has the legal rights of an individual.

The main advantages are:

(a) limitations of owners’ liability to the mount of their investments, (b) use of skilled
managers team to run the corporations, (c)easy transfer of ownership, (d) greater availability
of capital, (e) status as legal entity

The disadvantages are following:

(a) difficulty and expense in starting, (b) individual owner’s lack of control, (c) double
taxation, (d) government involvement, (e)manager’s possible lack of personal interest in the
corporation’s success .

“THE END”