Introduction to Business

Concept of business
• Literally, the word “business” means the state o
f being busy. 
• Generally the term business includes all human
activities concerned with earning money.
• In other words, business is an activity in which
various persons  regularly  produce or exchange
goods and services for mutual gain or profit.
 Concept of business
•   The goods and services produced or 
purchased for personal use are not included in
 “business”. 
 Activities included in business
• Farmer who cultivates land.
• Carpenter who makes furniture.
• Shopkeeper who sells goods to the
consumers.
• The doctor who examines patients.
• The factory owner who manufactures goods.
• The bank which receives deposits and
advances loans.
 Activities included in business
• All of these activities have a motive of
earning profit.

• Though business activity is undertaken to earn

profit, yet there is no assurance that it will
definitely earn profit.
• It may also suffer loss.
 Activities excluded from business
• There are certain organizations which do not
seek profit as their goal.
• These organizations are established with the
sole objective of rendering services to the
community.
• Typical examples are a hospital, a university, a
library etc.
 Activities excluded from business
• All the activities which are concerned with the
production or purchase of goods and services
for personal consumption fall outside the
scope of business.
• Examples: a shoemaker making a pair of shoes
for personal consumption.
• Tailor sewing shirts for his own use.
• A nurse nursing her own child.
 Definition….Business
• Business refers to all those activities which are
related to the production or purchase of
goods and services with the object of selling
them at a profit.
• “Business may be defined as human activities 
directed toward providing or acquiring 
wealth through buying and selling of goods.” 
 Definition….Business
•  Every  human  activity which  is  engaged  in 
for  the  sake  of  earning  profit may  be called
business.
• An institution organized and operated to 
provide goods and services to the society,
under the incentive of private gain is business.
 Definitions……Business
• Business is the sum total of all those activities
which are carried on by various enterprises,
regardless of size, in the production or
marketing of goods or services to the
consumers with the object of earning profit
through the satisfaction of human wants.
Structural diagram
 Characteristics of a business
• Capital
– Capital is the lifeblood of every business.
–   It is the most essential and important element of
 business. In case of deficiency, loans can be taken from 
various financial institutions.  
• Creation of utility
– Utility  is  an economic  term  referring  to  that 
characteristic of  a  certain  commodity, which can  satisfy 
any  human  need. Business  creates  utility,  which  gives 
benefit  to  the  entire society as well as the businessmen. 
 Characteristics
• Dealing in goods and services.
– Every business deals with sale, purchase, 
production and exchange of goods and services
 for some consideration. 
• Employment.
– Business  is  a  good  source  of  employment  for 
its  owners  as well  as  for  other  people,  for 
example, employees, agents, transporters etc. 
 Characteristics
• Islamic process.
– Business is an Islamic way of earning living.
Income from business is known as profit, which is 
Rizq‐e‐Halal.  The Holy Prophet Muhammad 
himself did  prosperous business. 
• Motive.
– The motive of business is to earn profit. Otherwise
it will not be termed as business.
 Characteristics
• Regular transactions
– Business has a nature of  regular dealings and 
series of  transactions.  So, 
in business, only those transactions are included
which have regularity and continuity.
• Risks and uncertainty
– Business involves a large volume of risk and 
uncertainty.  The risk element in business keeps a per
son vigilant and he tries to ward off his risk by execu
ting his policies properly.
 Characteristics
• Social welfare.
– Business  does  not  only  satisfy  the  producer, 
but  also  the  consumer  when  products  are 
offered for sale in markets. 
 Nature of business
• Economic activity.
– Business  is  an  economic  activity  as  it  is 
concerned  with  creation  of  wealth  through  the
satisfaction of human wants. 
• Human activity.
– Business  is  an  economic  activity  and  every 
economic  activity  is  done  by  human  beings. 
Thus, business is one of the most important 
human activities.
 Nature of business
• Social process.
– Business  is  run  by  owners  and 
employees with the  help  of  professionals  and 
customers. Thus, business is a social process.
• System.
– Business is a systematic arrangement of various 
elements, which leads to the attainment of 
particular objective, according to a well
established plan.