Class 11

Business Studies
Chapter 1

Business, Trade
&
Commerce
 Section 1

History of Trade and

Commerce
 History of Trade and Commerce in India:
 Indigenous Banking System,
 Rise of
 Intermediaries,



Transport,
Trading Communities:
Merchant Corporations,
1
 Major Trade Centers,
 Major Imports and Exports,
 Position of Indian Sub Continent in the World
Economy.
History of Trade and Commerce

Trade and commerce have played a vital

role in making India as a major actor in the
economic word in ancient times
History of Trade and Commerce
Commercial cities like Harappa and
Mohenjodaro were some examples for the
business development of ancient India
 History of Trade and Commerce

These civilizations had established commercial

connections with Mesopotamia and traded in
gold, silver, copper, gemstones, beads, pearls,
sea shells etc.
Mesopotamian Civilisation
Present day Iraq, Kuwait, Iran and Syria
History of Trade and Commerce

There were different types of coins and

weighing practices during that time
 Indigenous Banking System
As economic life progress, metallic money had been
introduced which in turn accelerated the economic activities

Documents such as Hundi and Chitti were in use

for carrying out transactions in which money passed
from hand to hand
 Indigenous Banking System

Hundi as an instrument of exchange, it involved a

contract which warrant the payment of money, the
promise or order which is unconditional and capable
of change through transfer by valid negotiation
 Indigenous Banking System
Indigenous banking system played a prominent role
in lending money and financing domestic and foreign
trade with currency and letter of credit

With the development of banking, people began to

deposit precious metals with lending individuals
functioning as Bankers or Seths
 Hundies practiced by Indian Merchant Communities

Name of Hundi Category Function

Dhani-jog Payable to any persons – no liability over who received the

payment

Darshani Payable to a specific person (someone respectable).

Sah-jog
Liability over who received the payment.

Firman-jog Payable to order

Dekhan-har Payable to the presented or bearer.

Dhani-jog Payable to any person – no liability over who received the

payment, but payment over a fixed term.
Muddati
Firman-jog Payable to order following a fixed term.

Drawn against dispatched goods. If goods lost in transit, the

Jokhmi drawer or holder bears the costs and the drawee carries no
liability.
 Rise of Intermediaries
Intermediaries played an important role n the
promotion of trade. They helped the producers
especially in foreign trade.

They consist of commission agents, brokers and

distributors for wholesale and retail of goods.
 Transport
Land Transport and Water Transport were popular in
ancient times

Roads as a means of transportation had assumed

key importance in the process of growth especially
in inland trade
Eg: The northern trade route from Bengal to Taxila
 Transport
Maritime trade was another important branch of
global trade network

Muziris (ancient harbor) in Malabar Coast (near to

the present-day Cochin) has a long history of
international maritime trade
 Transport
Calicut was also an important market for Chinese to
acquire items like frankincense, pepper (black gold),
pearls, cotton etc.

Pulicat on Coromandel Coast (Tamil Nadu) was a

major port in the 17th century
Textiles were the principal export item from Pulicat
to Southeast Asia
 Merchant Corporations
They were autonomous corporations (guilds) formed
to protect the interests of the traders

These corporations were organised on formal basis,

framed their own rules and code of conduct, which
even kings were supposed to accept and respect
 Merchant Corporations
The guild chief directly dealt with the king or tax
collectors and settled the market toll (tax) on behalf
of its fellow merchants at a fixed sum of money
Major Trade Centres
 Major Trade Centres
1
Pataliputra
Patna in Bihar today
Commercial town and major centre for export
of stones
 Major Trade Centres
2
Peshawar City in Pakistan
Very popular for export of wool and for the
import of horses. Major transactions between
India, China and Rome in the first century
 Major Trade Centres
3
Taxila
City in Pakistan, also called Thakshashila
Popularly known as the city of financial and
commercial banks
 Major Trade Centres
4
Indraprastha
Located in the region of present-day New
Delhi
It was a commercial junction where most
routes leading the east, west, south and north
converged (joined)
 Major Trade Centres
5
Mathura City in UP
It was an emporium of trade and people here
subsisted (lived) on commerce

Many routes from South India touched Mathura

and Broach (Bharuch in Gujarat)
 Major Trade Centres
6
Varanasi City in UP
Well known centre for textile industries and
became famous for gold silk cloth and
sandalwood workmanship

It had links with Taxila and Bharuch

 Major Trade Centres
7
Mithila City in Bihar
The traders in this city crossed the seas by boats,
through Bay of Bangal to the South China

They established trading colonies in South China

 Major Trade Centres
8
Ujjain City in MP
Different verities of clothes were exported to
different centres.

It had trade connections with Taxila and Peshawar.

 Major Trade Centres
9
Surat City in Gujarat
It was an emporium of western trade during
Mughal period

They were also famous for gold boarder sarees

 Major Trade Centres
10
Kanchi
Present day Kanchipuram in Tamil Nadu
Chinese came here to purchase pearls, glass
and rare stones and in return they sold gold
and silk
 Major Trade Centres
11
M
ad
ur
a

Cit
y
in
Ta
mil
Na
du
 Major Trade Centres
12
Broach
Present day Bharuch in
Gujarat
It was a major trade centre in Western India
 Major Trade Centres
13
Kaveripatta
Present day Kaveripattanam in Tamil Nadu
It was scientific in its construction as a city and
provided loading, unloading and strong facilities of
merchandise

It was also famous for perfumes, cosmetics,

scents, silk, wool, cotton and also for ship building
 Major Trade Centres
14
Tamralipti
City in West Bengal (Kolkata)
It was one of the greatest ports connected
both by sea and land

It was linked by road to Banaras (UP) and Taxila

 Major
Exports
and
Import
s
 Major Exports and Imports
Export Items:
Spices, wheat, sugar, indigo, opium, sesame
oil, cotton, parrot, live animals and animal
products etc.

Spices
 Major Exports and Imports
Import Items:
Horses, animal products, Chinese silks, linen,
wine, gold, silver, copper, etc.

Chinese silks
Position of Indian Subcontinent
in World Economy
(1AD to 1991)
 India in World Economy

From 1st to 7th centuries, India was estimated to

have the largest economy in the world
The country was often referred as ‘Swarnabhumi’
and ‘Swarnadweep’ by many writers and travelers
like Megasthenes, Faxian (Fa Hien), Xuanzang
(Huen Tsang) etc.because of its prosperity
 India in World Economy

During 18th century, the British empire began to

take roots in India, thereby the Indian economic
condition was slowly changed from being an
exporter of processed goods to the exporter of raw
materials and buyer of manufactured goods
India begins to

Reindustrialise
 India begins to Reindustrialise
After independence, the process of rebuilding the
Indian economy have been started
As a part of this the first five year plan was
implemented in 1952.

5 Year Plan
 India begins to Reindustrialise

Due importance was given to the establishment of

modern industries, modern technological and
scientific institutes, space and nuclear programs
 India begins to Reindustrialise

To overcome the problems of lack of capital, rise in

population, huge expenditure on defence,
inadequate infrastructure etc. India relied heavily on
borrowings from foreign sources and finally, agreed
to economic liberalization in 1991

Liberalization
 India begins to Reindustrialise

The Indian economy is one of the fastest growing

economies in the world today
The high growth sectors have been identified, which
are likely to grow at a rapid pace
 India begins to Reindustrialise

The recent initiatives of the Government of India

such as ‘Make in India’, ‘Skill India’, ‘Digital India’,
Foreign Trade Policy 2015-20 etc. is expected to
help the economy in terms of exports and imports
and trade balance
Section 2

Nature and Concept

of Business
 2
 Understand the meaning of business
with special reference to economic
and noneconomic activities.
 Discuss the characteristics of
business.
Economic
Activities Non-Economic
Activities

Human
Activities
Economic
Activities
 Economic Activities

Activities undertaken to earn money or

money’s worth and related to production and
exchange of wealth

Eg; Running a factory, Retail shop, Cultivating land etc.

 Economic Activities

Characteristics of Economic Activities

a. Related to Production of Wealth

 Economic Activities

Characteristics of Economic Activities

b. To Satisfy Human Wants

 Economic Activities

Characteristics of Economic Activities

c. Expectation of Earning Money

 Economic Activities

Characteristics of Economic Activities

d. Basis for Economic Development of the

Society
Non-Economic Activities
 Non-Economic
Activities
Activities which are undertaken not for any
reward but for the personal satisfaction

Example: A mother looks after her children,

A house-wife cooks food for the family,
Visiting Temples etc.
Differences Between
Economic Activities &
Non-Economic
Activities
 Economic Activities Vs.
Non-Economic
Activities
To earn money or
money's worth For personal
satisfaction

Economic Non-Economic
Activities
Activities
 Economic Activities Vs.
Non-Economic
Activities
It can be measured
In terms of money It cannot be
Measured in
Monetary terms

Economic Non-Economic
Activities
Activities
 Economic Activities Vs.
Non-Economic
Activities
Money is
the reward Mental satisfaction
Is the reward

Economic Non-Economic
Activities
Activities
 Economic Activities Vs.
Non-Economic
Activities

Basic Meaning Economic Non-Economic

Those activities whose aim is not to

Those activities whose earn money, but to satisfy social,
Purpose/ Notice Objective is to earn psychological and emotional needs.
money and to create wealth. For example love, sympathy,
patriotism.

People work in factories A housewife cooking food for her

Examples Cooking food in restaurant. family. A teacher training his daughter
A teacher teaching in a
school. at home.
 Types of
Economic
Activities
 Types of Economic Activities

Business Profession Employment

Concept of Business
The term business is derived from the work ‘busy’.
Therefore, business means being busy.

Concept of Business: – Business refers to those

economic activities involving the purchase production
and / or sale of goods and services with a motive of
earning profit by satisfying human needs in society.
Concept of Business
Business is defined as the “repeated buying and
selling or manufacturing of goods and services with
an intention to earn profit which involves the creation
of wealth.”

Example; A factory, A retail shop,

Commission agents, brokers
Concept of Business
People undertake various activities to satisfy
their needs

Concept of Business: – Business refers to those economic

activities involving the purchase production and / or sale of
goods and services with a motive of earning profit by
satisfying human needs in society.
Characteristics of
Business
 Characteristics of Business

1. An Economic Activity
It is undertaken with an object of earning
money or livelihood but not for love,
affection etc.

Eg: Purchase and sale of articles by a shop keeper

 Characteristics of Business

2. Production or Procurement of Goods

and Services
Every business
should either
produce or acquire
the goods in
which it deals
Goods may consists of capital goods and consumer goods
Eg: Capital Goods: Machinery, Furniture,
Consumer Goods: Sugar, Pen, Notebook etc.
 Characteristics of Business

Services may include facilities offered to

consumers like transportation, banking,
electricity etc.
 Characteristics of Business
3. Sale or Exchange of Goods & Services
There should be sale or exchange of
goods or services between the seller and
buyer

Goods produced for personal consumption is not a business

 Characteristics of Business
4. Dealing in Goods & Services on a
Regular Basis
A single transaction cannot be treated as a
business

Eg: A persons sells his old scooter even at a profit cannot be

treated as a business as there is no continuity.
 Characteristics of Business
5. Earning Profit

The business activity must be intended to

earn profit

Businessman should take all possible efforts to maximise

the profit by increasing sales volume or reducing cost
 Characteristics of Business
6. Uncertainty of Return

No business can predict its future profit

 Characteristics of Business
7. Element of Risk
Every business is subject to risk due to
various reasons

Eg: Change in fashion, fire, theft, natural calamities etc.

 Characteristics of Business
1. Economic Activity
2. Production of Goods and Services
3. Sale or exchange of Goods and Services
4. Regular Dealings
5. Earning Profit
6. Uncertainty of Return
7. Element of Risk

RRUPEES
 3
 Understand the concept of
business, profession and
employment.

 Differentiate between business,

profession and employment.
 Business: Refers to Purchase, production
and/ or sale of goods & services with the
objective of earning profit.
Profession: Includes those activities which
require special knowledge & skills in the
occupation.
Employment: Refers to the occupation in
which people work for others and get
remuneration in return.
Comparison of Business
Profession & Employment
Business – Profession - Employment

1 Mode of establishment

Business Employment
Profession

Based on Membership of Appointment

entrepreneur's professional Order
Decision body
Business – Profession - Employment

2 Nature of work

Business Profession Employment

Providing Performing
goods and Rendering work as per
services to the personalised service
public expert services contract
Business – Profession - Employment

3 Qualification

Business Profession Employment

Prescribed As prescribed
No minimum by the
qualification
and employer
qualification
training
Business – Profession - Employment

4 Reward of return

Business Profession Employment

Salary or
Profit Fees Wage
Business – Profession - Employment

5 Capital investment

Business Employment
Profession

Large capital Limited

based on No
the size of capital Capital
business
Business – Profession - Employment

6 Risk

Business Profession Employment

High Little No
Risk
Risk Risk
Business – Profession - Employment

7 Transfer of interest

Business Employment
Profession

Not Not
Transferable Transferabl
Transferabl
e e
Business – Profession - Employment

8 Code of conduct

Business Profession Employment

Professional
No code of
code of Laid down by
conduct
conduct the
is
followed employer
prescribed
Business – Profession - Employment

9 Examples:

Business Profession Employment

Jobs in banks,
CA, Legal, insurance,
Shop, Factory Govt.
Medical
etc. departments
Profession etc.
etc.
 Comparison: Business, Profession and Employment
Basics Business Profession Employment

1 Mode of Entrepreneur’s decision Membership of a Contract of

Establishment and legal formalities professional body employment

Rendering
2 Nature of work Providing goods and personalized and As per the contract
services to the public expert service

Prescribed
3 Qualification No minimum qualification qualification by the Prescribed by the
professional body employer

4 Reward or return Profit Fees Salary or wages

5 Capital Investment High Limited No capital

 Comparison: Business, Profession and Employment
Basics Business Profession Employment

6 Risk High Limited risk Little risk

7 Transfer of interest Possible Not possible Not possible

8 Code of conduct Not prescribed Prescribed by the Laid down by the

professional employer
body

Jobs in banks,
9 Examples Shop, Factory etc. CA, Legal, Medical insurance, govt.
Profession etc. departments etc.
Classification of Business Activities

 Appreciate the
economic and social
objectives of business. 4
 Examine the role of
profit in business.
Objectives of Business

The objective of business means the purpose for

which a business is established and carried on.
Proper selection of objectives is essential for the
success of a business.
The businessmen always have multiple objectives.
All objective may be classified into two broad
categories. These are
(1)Economic objectives and
(2)Social Objectives
Classification of Business Activities
1. Economic Objectives
Business is an economic activity and
therefore, its purpose is to show
economic results. The economic
objectives of business are follows:
 Economic Objectives
a
Market Standing
It refers to the position of an enterprise in
relation to its competitions by providing quality
products and better service to its customers
 Economic Objectives
b
Innovations (Novelty)
Innovation means the introduction of something
new to the market. It may be a new design,
new quality for the existing product, new
method of production etc.

1990's
 Economic Objectives
c
Productivity
Every enterprise should aim at greater
efficiency and productivity by the best use of
available resources
 Economic Objectives
d
Earning profits
Profit is regarded as the life-blood of a
business to survive and to make growth and
development of the enterprise
 Economic Objectives
e
Physical and financial
resources:
Acquiring physical resources like buildings, plant and
machinery, offices etc. and financial resources or fund
for its operations and ensure its efficient use
 Social Objectives

 Business is an integral part of society. It

makes use of resources of society.
 It earns profit by selling its products or
services to members of society.
 So it becomes obligatory on the part of the
businessman to do something for the
society.
 Social Objectives
Social responsibility
It refers to the social obligations of business
firms to contribute resources for solving
social problems and to work in a socially
desirable manner
 Social Objectives
a
Quality goods and services at Fair Price: The first social
objective of business is to provide better quality product at
reasonable rice and in proper quantity on continuous basis to
consumers examples.

Example: Consumers look for ISI mark on electrical goods, FPO

mark on food products. Hallmark on Jewellery.
 Social objectives
b
Avoidance of Anti-Social and Unfair
trade practices:
Anti-Social practices include hoarding, black
marketing and adulteration. Making false
claims in advertisements to mislead and
exploit people is an example of unfair trade
practice. Business should not indulge in such
practices.
 Social objectives
c
Generation of Employment

: Now days, employment is the biggest

problem of society. Business should provide
employment to more and more people living in
the country. Handicapped and disabled people
should be given extra care.
 Social objectives
d
Community service: Business should
contribute something to the society where it is
established and operated Library, dispensary,
educational institutions etc. are certain
contributions which a business can make and
help in the development of community.
 Personnel objectives
a
Manager performance and
development
The enterprise should take much initiative to
improve the efficiency of its managers by
conducting various programs to motivate them
 Personnel objectives
b
Worker performance and attitude
Every enterprise should aim at improving its
workers performance and their positive attitude
 Personnel objectives
c
Employee Welfare: Employees are a valuable
asset and they make significant contributions
towards the success of business. Another social
objective of business, therefore, is to ensure welfare
of employees by providing good working conditions,
fair wages and facilities such as housing, medical
and entertainment etc. such welfare facilities help to
improve physical and mental health of employees.
Role of Profit in Business
Business is established for the purpose of
earning profit. Profit plays a very
important role in business. The role of
profit in business can be brought out by
the following facts :-
(1) For Long Survival: Profit alone
help a business to continue to exist for
a long period. In the absence of profit
the establishment of a particular
business loses its justification.
2) For growth & Expansion: All
businessmen want their business to
expand and to grow. For development
of business additional capital is
needed. Retained earnings is a very
good source of capital.
(3) For increasing efficiency: Profit is
that power which motivates both the
parties – owner and workers to do
their best. As they know that in case of
good profits they will get good
compensation for their efforts so it
finally helps in increasing the
efficiency of business.
(4) For Building prestige and
Recognition: For gaining prestige in the
Society, Business had to satisfy all the
parties concerned. It has to supply good
quality product/service at reasonable
price to customers, adequate
remuneration to employees, to pay
sufficient dividend to the shareholders
etc. and all these are possible only if the
business is earning good profit.
 Understand the
broad categories of
business activities- 5
industry and
commerce.
 Classification of
Business
Activities
Classification of Business Activities

Industry Commerce
Classification of Business Activities
Classification of Business Activities
Industry

Industry refers to that part of business which is

concerned with the production of goods and
material

An industry may be classified into primary industry,

secondary industry and tertiary industry
Industry-types: primary,
secondary, tertiary
6
Meaning and subgroups
Types of
Industries
 Types of Industries
Primary Industry

Engaged in extracting, producing and

processing of natural resources

Eg: Extractive industries

and genetic industries
Classification of Primary
Industries
Classification of Primary Industries
Extractive

Industries
They
are
engage
d in the
extractio
n
( collecti
on) of
Eg: Mining,
useful fishing, agriculture, quarrying etc.
Classification of Primary Industries
Extractive

Industries
The products of these industries are either
directly consumed or used as raw
materials by other industries

Coal
Classification of Primary Industries
Genetic
Industries
Engaged in the reproduction or
multiplication of plants and animals

E.g. Plant nurseries, Poultry farms, cattle breeding

farms etc.
 Types of Industries
Secondary Industries

They are concerned with the materials

which have already been produced at the
primary stage
Oil Refinery

Eg: Manufacturing industries and

Construction industries
 Classification of
Secondary
Industries
 Classification of Secondary Industries
Manufacturing
Industries
Engaged with the conversion of raw
materials into finished goods

E.g: Cotton into textiles, timber into furniture etc.

Classification of Secondary Industries
Manufacturing
Industries

They change the form of goods i.e. raw

material into finished goods and thus
create form utility

Raw Materials for

Cement
Classification of Secondary Industries
Manufacturing
Industries
They produce Consumer Goods, Industrial
Goods and Capital Goods
 Types of
Manufacturing Industries
 Types of Manufacturing Industries
a Analytical Industries

Analyses and
separates different
elements from the
same materials

Eg:
 Types of Manufacturing Industries
b Synthetical Industries
Combines various ingredients into a new
product

Eg: Cement is produced from Lime, Silica,

Magnesia etc.
 Types of Manufacturing Industries
c Processing Industries
It involves successive stages for
manufacturing finished
products Paper Making Process

Eg: Sugar, Paper etc.

 Types of Manufacturing Industries
d Assembling Industries
Assembles different component parts to
make a new product

Eg: Car, T V, Computer, Mobile Phone etc.

Classification of Secondary Industries
Construction
Industries
Engaged in the construction of buildings,
dams, roads, bridges etc.

They use the products of manufacturing

industries and extractive industries
 Types of Industries
Tertiary Industries

They are providing support services to

primary and secondary industries and it
form part of commerce

Insurance

Eg: All service activities which are auxiliaries to trade

like transport, banking, insurance etc.
 7
Discuss the meaning of commerce, trade and
auxiliaries to trade.
Discuss the meaning of different types of trade
and auxiliaries to trade.
Examine the role of commerce- trade and
auxiliaries to trade.
Commerce
Commerce
It is concerned with buying, selling and distribution of
commodities and it is an organized system for
exchange of goods and services in between the
businessman and the customers
Commerce
It is also concerned with the marketing aspects
of business, i.e. supply of right type of goods
to the right persons, at the right time and at
the
right price

:. Commerce includes trade and aids to trade

Commerce

Commerce

Trad Aids to
e Trade
Commerce

Definition

The sum total of all those activities which are

involved in the removal of hindrances in the
process of exchange of goods
Functions of
Commerce
Functions of Commerce
1. Removal of Hindrance of Person
It refers to the lack of contact between the
producers and customers

Here the trader acts as an intermediary among them

and customers are able to find out the products which
they are wanted from the market
Functions of Commerce
2. Removal of Hindrance of Place
Producers and customers are in distant places,
hence the commodities should be transferred
from the production centre to the customers

This problem can be solved by the system of

commerce by means of transport, packing and
insurance
Functions of Commerce
3. Removal of Hindrance of Risk
Goods and properties of business are subject to
various risk such as fire, theft, damage etc.,

They can be protected by insurance

Functions of Commerce
4. Removal of Hindrance of Time
There may be a gap between the production and
consumption as the production is carried out in
anticipation of future demands
Therefore, it becomes necessary to store the
goods until they are sold

This problem can be solved by warehousing

Functions of Commerce
5. Removal of Hindrance of Knowledge
Knowledge of customers about the products and
services offered by business organisations is a
major problem in business

Advertising helps in the removal of hindrance of

knowledge among the buyers
Functions of Commerce
6. Removal of Hindrance of Finance
The problem of finance can be handled by banks,
which form part of commerce

It will also help the businessman in exchange of

money between different persons at different
places
 Functions of Commerce
1. Removal of Hindrance of Person
2. Removal of Hindrance of Place
3. Removal of Hindrance of Risk
4. Removal of Hindrance of Time
5. Removal of Hindrance of Knowledge
6. Removal of Hindrance of Finance
Trade
 Trad
e
Buying and selling of goods, which involves the
exchange of commodities for money or money’s
worth
Types of Trade

Trad
e

Home Foreign
Trade
Trade
 Types of Trade

Home Trade
It is also known as Mumbai
domestic trade
or internal trade
Kochi

Buying and selling of goods within the country

and both the buyer and seller should belong
the same nation
Types of Trade

Home

Trade
Wholesale Retail
Trade
Trad
e
 Types of Trade
a Wholesale Trade
Buying and selling in large quantities

A wholesaler buys goods directly from the

producers and sells them to the retailers
 Types of Trade
b Retail Trade
Buying and selling of goods in small quantities

A retail trader buys goods from the wholesalers

and sells them to the customers
Types of Trade

Foreign
Trade
Export Import

Entrepot
 Types of Trade
Foreign Trade
It is also known as External trade or
international trade

It involves the buying and selling of goods and

services in between the persons belonging to two
or more countries
 Types of Trade
a Export
Sale of goods to foreign countries
 Types of Trade
b Import
Purchase of goods from foreign countries
 Types of Trade
c Entrepot
Importing goods from one country for the purpose
of exporting them to some other countries

England India China

 Types of Trade

Home Trade Foreign Trade

Wholesale Trade Retail Trade

Export Trade Import Trade Entrepot Trade

AidstoTrade
(AuxiliariestoTrade)
Aids to Trade

The activities which assist trade are called

Aids to Trade or Auxiliaries to Trade
 Aids to Trade
Aids to trade includes Transport, Banking,
Insurance, Warehousing, Advertising etc.

These service enterprises facilitate movements,

finance, risk coverage, storage, and sales
promotion of goods
 Aids to Trade
1 Transport and Communication
Usually production takes place in certain locations
and consumption all over the country

This problem is removed by transport through

various modes such as road, rail or water
transport
Aids to Trade
Along with transport, Communication is very
essential, which helps the producers, traders and
consumers in exchange of information

Postal service, telephones and other modern

means of communication may be regarded as
auxiliaries to business activities
Aids to Trade
2 Banking and Finance
All business concerns need fund for acquiring
assets, raw materials and meeting day today
expenses

Finance is the foundation of all business

provided by banks
 Aids to Trade
How banks help the business ?
Banks accept deposits from the public and provide
credit facilities for business

They lend money (O/D, CC, Loans), discounting of

bills, collection of cheques, remittance facilities
and various other services to the business
Aids to Trade
3
Insurance
Insurance provides protection against the risk of
loss due to accident, fire, earthquake, theft,
damage of goods in stock and transit

On payment of a nominal amount called premium,

the amount of loss or damage is compensated by
the insurance company
 Aids to Trade
4 Warehousing
Production is always in anticipation of future
demands, so that the products are to be kept in
good condition until they are sold

Warehouses facilitates storage of goods and

stabilises prices by equalising supplies
Aids to Trade
5 Advertising
It helps to reach millions of customers for
promoting sales and giving information
about the product

Thus advertising makes

possible marketing of
goods and services on a
large scale
 AidstoTrade
(AuxiliariestoTrade)

1. Transport and Communication

2. Banking and Finance
3. Insurance
4. Warehousing
5. Advertising
 8
Understand the concept of
risk as a special
characteristic of business.

Examine the nature and

causes of business risks.
Business Risk
 BusinessRisk
Risk = Possibility of loss
It can be defined as the chances of loss due
to certain uncertain events in the future
 BusinessRisk

Types of
Risk

Speculative Pure
Risk
Risk
 BusinessRisk
Speculative Risk
It involves both chances of gain or loss.
If the market condition is favourable it will
result in gain, otherwise, loss.

It arises due to change in demand and supply,

change in taste and habits of customers etc.
 BusinessRisk
Pure Risk
Possibility of loss or even no loss.
If such events take place, it may result in
loss, non-occurrence of such events results
in absence of loss, instead of gain

It arises due to fire, theft, earthquake, strike etc.

 NatureofBusinessRisk
1
It arises due to
uncertainties
Lack of knowledge about what is going
to happen in future
Govt.
P l o id
ti c

Policy
as

gs r
Av

Pa e
Ba pe
Us

Eg: Change in demand, Govt. Policy, Epidemic like

Corona Virus etc.
 NatureofBusinessRisk
2
It is an essential part of every business
Every business has its own risks, no
business can avoid risk

Risk can be minimised but cannot be eliminated

 NatureofBusinessRisk
3
Degree of risk depends on the nature and
size of business

Eg: 1. Business dealing with fashionable items has a high

degree of risk
2. A large scale business has high risk than small scale
 NatureofBusinessRisk
4
Profit is the reward for bearing risk
An entrepreneur takes risks under the
expectation of higher profit

No risk
means no
gain
 Methods of
dealing with Risk
 How todealwithBusinessRisk
Methods of dealing with risk:

1.Not to enter high risky transactions

2. Take precautionary measures like
fire fighting equipments etc.
3. Take an insurance policy to cover
various risks.
4. Take measures like provision for bad
debts, investment fluctuation fund etc.
 Causesof
Business Risk
 CausesofBusinessRisk
1
N
a
t
u
r
a
l

C include damages from flood, fire,

It may
a earthquake etc.
u
 CausesofBusinessRisk
2
Human Causes
It may arise due to certain human activities

Eg: Theft, bad debt, mistakes, accidents etc.

 CausesofBusinessRisk
3
E
c
o
n
o
m
i
c

C
a
 CausesofBusinessRisk
4
O
t
h
e
r

C
a
u
s
e
 Natural

Causes
Other Causes Human
Causes of
Risk Causes

Economic
Causes
Content given in further slides has been
deleted by CBSE from the syllabus so
these topics will not be part of internal
assessment and year-end board
examination.
 Starting a
Business
BasicFactors
StartingaBusines -BasicFactors
1
S
e
l
e
c
t
i
o
n
Jewellery Textiles
o
 StartingaBusines -BasicFactors
2
Size of the firm
The promoter has to decide the size of
business, which may be either small scale,
medium scale or large scale depends on the
financial stability, future demand etc.

Small scale Medium scale Large scale

StartingaBusines -BasicFactors
3
C
h
oi
ce
of
fo
r
m
of
o
wSole Proprietorship Partnership
 StartingaBusines -BasicFactors
4
Location of business
It must be decided on the basis of availability of land,
electricity, water, accessibility to market,
transportation, scope for expansion etc.

Unscientific location affects the efficiency and

profitability of business.
StartingaBusines -BasicFactors
5
Financing the proposition
(Capital needs)
The promoter has to decide
about the
requirement of capital and its
sources
Deposits SharesDebentures

Loans

He has to consider the sources like shares, debentures or

bank loans, cost of capital (interest or dividend) etc.
StartingaBusines -BasicFactors
6
Physical facilities
It means the resources used to convert raw
material into finished goods

Eg: Buildings, machines and equipments, skilled and

unskilled workers, good quality raw materials etc.
 StartingaBusines -BasicFactors
7
Plant lay out
A proper arrangement of machines, equipment and
workers will result in reduction of wastages, better
use of available space, safety and security to
workers etc.

Plant
Lay out of

Recycling
Glass
Bottles
 StartingaBusines -BasicFactors
8
Co
mpe
tent
and
com
mitt
ed
wor
k
forc
StartingaBusines -BasicFactors
9
Tax planning
It means to minimize the taxes through better
planning about location (tax free zones), size
of business etc.

Tax planning does not mean non-payment of tax

 StartingaBusines -BasicFactors
10
Launching the enterprise
Finally the entrepreneur launch his business by
mobilizing necessary resources, starting
production process and initiating sales promotion
activities
 StartingaBusines BasicFactors
1. Selection of line of business
2. Size of the firm
3. Ownership
4. Location
5. Capital Needs
6. Physical Facilities
7. Plant Lay Out
8. Competent Work Force
9. Tax Planning
10. Launching the Enterprise