What is business? What is its purpose?

Business is an economic activity which is concerned with production, procurement, sale, distribution or exchange of goods and services with the main aim of earning profit. Profit means surplus income over expenses.
What is Business
Characteristics of business:

An economic activity -

Business is an economic activity as it consists of various process of procurement, production, sale, distribution or exchange of goods and services with the main motive of earning profit.

Production or procurement of goods and services-

Every business enterprise either produces the goods and services it deals in or procures them from producers. Like Multinational corporations. Mnc's operate in more than one country hence they integrate the development of local enterprises and local enterprises can act as supplier to Mnc's.

Read More: Building The Confidence To Succeed In Business

Dealing in goods and services to complete the needs of human beings in society -

Business involves production of goods and services. These goods and services should be produced for the purpose of sale but not for the purpose of self consumption. Selling of their goods and services will bring in money or income but production for self consumption will not bring any money. For example, production of crops for the purpose of sale will be considered as business as it will bring in money to the producer but production for self consumption will not be considered as business.

Read More: Job Security versus Business Opportunity

Dealing in goods and services on a regular basis -

This is one of the most important and main feature of business that it must engage in trading activity on a regular basis. Selling or buying of goods ones or twice or occasionally will not be considered as business.  

For example:  If a person sells property once than it cannot be considered as business activity. He must buy or sell property regularly in order to call it a business transaction.

Profit Motive -

If, in a transaction profit motive is missing, then it cannot be considered as business. Profit is the main and most important objective of business. A business is undertaken only with the hope of earning money.

Read More: Become a successful entrepreneur

Risk -

Risk is an immortal phenomenon which can never be separated from business. In, business, there is always possibility of losses.  Risk can be minimized by taking various safeguards such as insurance etc but can never be eliminated.

Role of profit in business

A business cannot survive without profit. Profit is needed to carry on operational activities of business.

The success and strength of the business enterprise is measured in term of profit.

It helps to create good will of the business enterprise in society.

With large profits, Business enterprises can pay satisfactory wages to its workers, which will improve their standard of living.

Business enterprises with large profits can help in the social Programmes organized by NGO's and government. They can donate funds in the form of charity to NGO's and other social organizations.

Author Bio:

My name is NIKHIL SINGH. I am a 21 old blogger From India. I loves to Read books and Gain Knowledge. This blog provides lots of Information on the variety of Topics.

Author Let's More Education

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