Nature And Purpose

Of Business
 Concept of business

Business means busyness or the state of being busy .

Business includes all occupations in which people
regularly engage in activities with a view to earning
profit. Such activities may consist of production or
purchase of goods for sale , or exchange of goods or
providing services to satisfy the needs of others
 Human Activities
In every society , people undertake various
activities to satisfy their wants. These activities
may broadly be classified in to two;
Economic activities
Non - economic activities
 Economic activities
Activities undertaken with the object of
earning money or livelihood are known as
economic activities . for example ; a teacher
goes to school, a manager to his office, a
doctor to his clinic , a worker to the factory
and a lawyer to the court, etc.
 Non-economic Activities
Activities which are undertaken to derive
psychological satisfaction or for religious or social
obligations, or are performed out of love, sympathy,
patriotism and similar sentiments are called non
economic activities. A house wife cooking for the family,
a man visits to the temple for the day’s prayers are all
examples of non-economic activities. The purpose of
such activities is not to earn money . It gives the
happiness, pleasure or satisfaction , which cannot be
expressed in terms of money
 Characteristics of business activities

An Economic Activity
Production or Procurement of Goods & services

Sale or exchange of goods & services

Dealing in goods & services on a Regular
basis
Profit Earning
Uncertainty of Returns
 An Economic Activity

Business is considered to be an economic

activity since it is concerned with the production
and distribution of goods and service. And carried
on regularly with the object of earning profit.
 Production Or Procurement Of
Goods And Services
Before goods are offered to people for consumption, these
must be either produced or procured from various sources.
Thus, every business enterprise either produce on its or
assembles them from producers to be sold to consumers.
Goods may be consumer goods (items of daily use like pen ,
pencil ,soap, sugar ). Services denotes facilities offered to
consumers.eg; transportation, insurance, banking ,electricity
etc..
 Sales Or Exchange Of
Goods And Service

Sales or exchange of goods and service is for the

satisfaction of human needs. All business activities
involves production, purchase, sale and transfer of goods
and service And essential characteristics of business is that
there should be sale or exchange of goods and services
between buyer and seller.
 Dealing in goods and services
On a Regular Basis
Business consists of dealing in goods and service on a
regular basis. Goods produced or purchased for business
purpose may be consumers goods like cloth ,shoe ,food stuffs
etc.., or capital goods like tools and machinery. Consumer
goods are used directly for consumption. Capital goods assist
in the production of consumer goods. Services are those
facility offered to customers in the form of transportation,
supply of electricity, water etc...
 Profit motive

One of the main purpose of business is to earn

income by way of profit . It must earn profit for
its survival, growth, expansion, research and
development and for its own prestige . Profits
must be earn through legal and fair ways.
 Uncertainty of Returns
It is through risk - taking that a businessman earns profits.
Risk means the possibility of a loss. Business decision are
based on several assumption which may not come true.
Profits of a business depend not only upon the efforts of the
business concerned but also upon a large number of uncertain
and uncontrollable factors like,
• change in technology
• change in consumers taste and fashions
• increase in the degree of competition
• labour problems
• shortage of raw materials
• fire, theft, natural calamities and accidents