Eco - 01 Solved Assignments

Topics: Initial public offering, Bank, Underwriting Pages: 14 (4232 words) Published: March 27, 2011
IGNOU B.Com ECO-01 Solved Assignments 2011

Course Code: Eco-01
Assignment code: Eco-01/TMA/2010-11
By-Mizbah Khan


Essential Features of Business:

Business refers to the human activities engaged in production and/or exchange of want satisfying goods and services carried with the intention of earning profits. We can list the following five broad features of business:

1 Dealings in goods and services: Business deals with goods and services. The goods maybe consumer goods such as sweets, bread, cloth, shoes, etc: They may be producer's goods such as machinery, equipment, etc., which are used to produce further goods for consumption. Business also deals with services such as transport, warehousing, banking, insurance, etc., which are intangible and invisible goods.

2 Production and/or exchange: You can call an economic activity a 'business' only when there is production or transfer or exchange or sale of goods or services for value. If goods are produced for self-consumption or presentation as gift, such activities shall not be treated as business. In a business activity, there must be two parties i.e., a buyer and a seller. Such activity should concern with the transfer of goods or exchange of goods between a buyer and a seller. The goods may be bartered or exchanged for money.

3 Continuity and regularity in dealings: A single transaction shall not be treated as business. An activity is treated as business only whon it is undertaken continually or at . least recuriently. For example, if a person sells his residential house, it is not contidered as business. If he repeatedly buys houses and sells to others, such activity comes under business. But how frequently the transaction should occur depends on the nature of the activity. For example, a ship building company takes a long time to manufabure and sell a ship. At the same time, a vegetable vendor purchases vegetables from the market in the morning and sells out to his customers by evening. But both these activities are treated as business. 4 Profit motive: Earning profit is the primary motive of business. This is not to undermine the importance of the element of service in business activity. In fact a business will flourish only when it is able to serve its customers to their satisfaction. Profits are essential to enable the business to survive, to grow, expand, and to get recognition.

5 Element of risk: In every business, there is a possibility of incurring loss. This possibility of incurring loss is termed as risk. The element of risk exists due to a variety of factors which are outside the control of the business enterprise. There are two kinds of risks:- ( 1 ) Risks whose probability can be calculated and can be insured. Losses due to fire, floods, theft, etc., are some examples. (2) Risks whose probability cannot be calculated and which cannot be insured against, e.g., changing technology, fall in demand, changing                    fashions, short supply of raw materials, etc. These risks are to be completely born by the enterprise.

According to urwick, "profit can no more be the objective of a business than eating is the objective of living". Thus, serving the Community is regarded as another important objective of business. Therefore, while profit is necessary for the businessman to stay in business, he ought to aim at something more for its survival and growth. Basically being an economic activity, primary objectives of business are economic. Business, being a part of the society, has obligations towards the society also. Business activity is, generally, carried out through employees who are human beings. In fact, the efficiency and the success of the business enterprise depends on the motivation and ability of its employees. Therefore, business must also have some human objectives to safeguard the interests of its employees. Thus the objectives of business could be listed under three broad headings:

1. Economic objectives:...
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