Business Studies

Nature and Purpose of Business

Question:

"No business is risk free."Do you agree? Justify your answer, mentioning the nature and causes of business risk.

Answer:

Yes, we agree. We cannot think of any business which is risk free. You start a general store—the simplest business. There is a risk of things you buy getting wasted due to changes in demand pattern. You start a garments shop, fashion may change making your stock a waste and so on. There is not even a single business where there is no risk. It will be clearer when we look at the nature and causes of risk.

  1. Nature of Business Risks
    • Business risks arise due to uncertainties: Natural calamities, change in demand and prices, change in technology, etc. are some of the examples of uncertainty which create risks.
    • Risk is an essential part of every business: No business can avoid the risk. Risk can be minimized, but cannot be eliminated.
    •  Degree of risk depends mainly upon the nature and size of business: For small scale business it is less and for large scale business it is more.
    • Profit is the reward for risk taking: An entrepreneur bears risks and in consideration, he gets rewarded in the form of profit. Greater the risk higher is the chance of profit.
  2. Causes of Business Risk
  • Natural causes: These are beyond human control, e.g., flood, earthquake, heavy rains, famine, etc.
  •  Human causes: It includes carelessness or negligence of employees, e.g. theft, strikes, riots, misappropriation of cash and goods, etc.
  • Economic causes: These are related to a chance of loss due to changes in market condition, e.g., fluctuations in demand and prices, competition, change in technology etc.
  • Physical causes: Mechanical defects or failures may also lead to losses, e.g. bursting of the boiler or machine may cause death or destruction.
  • Legal and Political Causes: These causes of business risk include:
    (а) Changes in government policies regarding foreign trade
    (b) Entry of multinational companies
    (c) Changes in laws affecting the business like to license, taxation, etc
    (d) Changes in consumer laws and labour laws.
    Think of any business. Risk in one way or the other must be applied to it. Hence, we may conclude that no business is risk free.
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Nature and Purpose of Business

Q 1.

Explain political and legal causes of business risks.

Q 2.

Explain the concept of business.

Q 3.

Can profits be the sole objective of a business? Justify your answer by giving suitable reasons.

Q 4.

What are the functions of commerce?

Q 5.

Define Profession. Discuss its salient features.

Q 6.

State the different types of economic activities.

Q 7.

"No business is risk free."Do you agree? Justify your answer, mentioning the nature and causes of business risk.

Q 8.

Explain with examples the various types of industries.

Q 9.

What is business risk? What is its nature?

Q 10.

If you need , to start doing an economic activity to earn livelihood for your family, which one would you like and why?

Q 11.

What are various types of industries?

Q 12.

Why is business considered an economic activity?

Q 13.

Explain any two business activities which are auxiliaries to trade.

Q 14.

Explain the characteristics of business.

Q 15.

If one starts a business, which objective will be of utmost importance to you and why?

Q 16.

How would you classify business activities?

Q 17.

Define commerce. Discuss its importance in the business world.

Q 18.

What is the role of profit in business?

Q 19.

Why does business need multiple objectives? Explain any five such objectives.

Q 20.

Compare business with profession and employment.

Q 21.

Explain the concept of business risk and its causes.

Q 22.

What are the hindrances in the commerce? Which agencies are used to remove these hindrances?

Q 23.

Distinguish between industry, trade and commerce.

Q 24.

What factors are important to be considered while starting a business? Explain.

Q 25.

Describe the activities relating to commerce.

Q 26.

Compare business with profession and employment.

Q 27.

Distinguish between industry, trade and commerce.

Q 28.

"Risk is the element which makes the business different from other economic activities."Do you agree? Justify your answer.

Q 29.

Explain the economic and social objectives of the business.

Q 30.

"Economic and non-economic activities don't substitute, but complementary to each other."Do you agree? Explain.

Q 31.

What are the functions of commerce?

Q 32.

"Earning of profits is the main objective of a business and other objectives are there to aid it only."Do you agree? Justify your answer.

Q 33.

Differentiate between economic and non-economic activities.

Q 34.

Differentiate between insurable risks and non-insurable risks.