Commerce

Q. What is the role of Profit in Business?

Ans: The role of profit in business is essential for its survival and success. Profit serves as a
reward for taking risks and making sound decisions. It allows a company to reinvest in growth,
create more job opportunities, satisfy stakeholders, and ensure the business can withstand
economic challenges.

Q. State the difference between Economic and Non-Economic activities.

Ans:

Q. What are the characteristics of business?

Ans:
1. Making Money: Businesses want to make more money than they spend so they can
grow and do better.
2. Selling Stuff or Services: Businesses sell things or offer services to people, and in
return, people pay them money for those things or services.
3. Dealing with Risks: Businesses have to handle uncertainties and risks that can affect
their success, so they need to be careful and smart in their decisions.
4. Working Together: Businesses have a structure with different people doing different
jobs to work well and get things done.
5. Separate Identity: A business is like its own person in the eyes of the law. It can own
things, make contracts, and be responsible for its own actions, separate from the people
who own or run it.
Q. State the objectives of business.
Ans: Objectives of business are as follows:
1. Earning Profits: Business has to earn a reasonable profit so as to sustain its growth and
survive in the market.
2. Market Standing: Business Should have a better position in the market in relation to its
competitors.
3. Innovation: Business should come up with new ideas, inventions and new methods for
sustainable growth and survival.
4. Productivity: Productivity is ascertained by comparing the value of output with the value of
input. Business must work efficiently and effectively so as to enhance its productivity.

Q. What is the role of profit in business?

Ans: Every business operates with an aim to earn more than what has been
invested and profit is the excess of revenue over cost. Profit plays an important
role in business:
(i) It is a source of income for business persons.
(ii) It can be a source of finance for meeting expansion requirements of the
business.
(iii) It indicates the efficient working of business.
(iv) It can be taken as society's approval of the utility of business.
(v) It builds up the reputation of a business enterprise.

Q. Is maximizing profit the sole objective of business? If not, why?

Ans: No, maximizing profit is not the sole objective of business. There are other
important reasons why businesses have multiple objectives:
Sustainability: Businesses need to focus on long-term success and not just
immediate profits. Sustainable practices ensure their survival and growth over
time.
Customer Satisfaction: Satisfied customers keep coming back and bring in more
business through positive word-of-mouth.
Employee Well-being: Happy employees are more motivated and productive,
leading to better overall performance.
Ethics and Reputation: Being ethical and responsible builds trust with customers,
employees, and the community, enhancing the business's reputation.
Social Impact: Businesses are part of society, and considering social and
environmental factors helps create a positive impact and support from the
community.

Q. “Business is an institution organized and operated to provide goods and

services under the incentive of private gain”. Discuss.
Ans: The statement is correct in these respects:

(i) Business is an economic activity as it is undertaken with the main objective of

earning profits. Profit is essential to cover costs and risks of the business. Every
business must earn a reasonable profit to survive and grow.
(ii) It involves sale, exchange purchase of goods (sugar, pen, soap etc.) and
services (transportation, banking, insurance, etc) on a regular basis for mutual
profit through the satisfaction of human wants.

Q. What s industry?
Ans: Industry refers to economic activity that is concerned with the production of
goods, extraction of minerals or the provision of services. Industries provide
employment and help in eradicating unemployment and poverty in the country.

Q. Major differences between industry, commerce and trade are as follows:

Basis Industry Trade Commerce

It involves It involves transfer
manufacturing activities or exchange of It involves distribution
Meaning such as extraction, products of products produced
construction and distributed by by industries.
production of goods. commerce.
Requires less Requires less amount
Requires huge amount capital than of capital than industry
Capital
of capital to establish industry and but larger amount than
Requirement
industry. commerce. trade to operate its
activities.
Relatively less Less risky than
Level Of Risky than commerce
risky than industry industry but involves
Risk and trade.
and commerce. high risk than trade.
Q. Define primary sector with example.
Ans: The primary sector is the part of the economy where people directly extract or gather
natural resources from the earth. It includes activities like farming, fishing, forestry, and mining.
For example, farmers grow crops and raise animals, fishermen catch fish from oceans or rivers,
loggers cut down trees for wood, and miners extract valuable minerals like coal or gold from
mines. The primary sector is essential because it provides the raw materials that other sectors,
like manufacturing and services, need to produce goods and offer services to people.

Q. Define secondary sector with example.

Ans: The secondary sector is the part of the economy where raw materials from the primary
sector are transformed into finished products. It includes activities like manufacturing and
construction. For example, when a factory takes raw cotton from the primary sector and turns it
into clothing, or when a construction company uses wood and steel from the primary sector to
build houses and buildings, they are operating in the secondary sector. This sector plays a
crucial role in adding value to raw materials and creating the goods we use in our daily lives.

Q. Define tertiary sector with example.

Ans: The tertiary sector is the part of the economy that provides services to people. It includes
activities like retail, healthcare, education, transportation, and entertainment. For example,
when you go to a grocery store, visit a doctor, attend school, take a bus or watch a movie, you
are using services from the tertiary sector. This sector is important because it offers a wide
range of services that help meet people's needs, improve their quality of life, and support the
overall functioning of society.

Q. What are functions of commerce? Learn any six points.

Ans: The functions of commerce encompass a wide range of activities involved in
the buying and selling of goods and services in the market. Here are some key
functions of commerce:
Buying and Selling: Facilitating the exchange of goods and services between
buyers and sellers, ensuring that products reach the consumers who demand
them.
Production and Procurement: Overseeing the production of goods and services
or acquiring them from manufacturers to ensure a steady supply in the market.
Storage and Warehousing: Managing inventories and storing goods to ensure
they are readily available when needed.
Transportation: Moving goods from production centers to distribution points
and ultimately to consumers.
Advertising and Marketing: Promoting products and services to create
awareness and stimulate demand among potential customers.
Financing: Providing and arranging funds for businesses to carry out their
operations and investments.
Risk Management: Assessing and mitigating various risks, such as market
fluctuations, credit risks, and uncertainties.
Insurance: Offering coverage to protect businesses against potential losses and
damages.
Standardization and Grading: Establishing quality standards for products to
ensure consistency and consumer confidence.
Banking and Payment Processing: Facilitating monetary transactions and
electronic payments between buyers and sellers.

Q. What is the importance of commerce? Learn any six points.

Ans: The importance of commerce is far-reaching and touches every aspect of
modern society and the economy. Some key reasons why commerce is crucial
are:
Economic Growth: Commerce drives economic growth by facilitating the
exchange of goods and services, encouraging entrepreneurship, and generating
employment opportunities.
Resource Allocation: It ensures efficient allocation of resources by connecting
producers and consumers, optimizing production, and distributing goods where
they are most needed.
Standard of Living: Commerce provides access to a wide variety of goods and
services, improving the standard of living and enhancing people's quality of life.
Global Trade: International commerce fosters global trade, promoting
cooperation among nations and enabling access to resources and products not
locally available.
Innovation and Technology: As commerce evolves, it encourages technological
advancements and innovation to meet changing consumer demands and
improve business processes.
Wealth Creation: Successful commerce leads to profit generation, wealth
creation, and the accumulation of capital for further investment and economic
development.
Job Creation: Commerce creates jobs across various sectors, supporting
livelihoods and reducing unemployment rates.
Tax Revenue: Governments rely on commerce to generate tax revenue, which
funds public services, infrastructure, and social programs.
Consumer Choice: Commerce offers consumers a wide range of choices, allowing
them to select products and services that align with their preferences and needs.

Q. Discuss the role of small business in India.

Ans: The role of small business in India are as follows:
1. Major portion in industrial units: About 95% of the industrial units in the
country consists of small industries and 40% of the total industrial output is
contributed by these industries. 45% of the total exports (direct and indirect) from
India are contributed by them.
2. Low cost of production: The cost of production in these industries is very low.
Because of low overhead expenses, both establishment and running costs are low.
3. Quick decisions: Small size of the organisations enables the business firms to
take quick and timely decisions and to capture new business opportunities at the
right time.
4. Good personal relations: Inherent strengths like adaptability and personal touch
enables the small-scale industries to maintain good personal relations with both
the customers and the employees.
5. Simple and flexible production techniques: Simple and flexible production
techniques are used by these enterprises which make them very much suitable for
customized production, which means designing a product according to the tastes,
preferences and requirements of the customers.
6. Second largest employment provider: After agriculture, these industries are the
second largest provider of employment in India.
Q. Distinguish between private and public sector?
Ans:

Public Sector Private Sector

This sector is controlled and managed by

This sector is owned by a private individual.
the government.

The purpose of the public sector is not just Activities in the private sector are guided by
to earn profits. the motive to earn profits.

This sector focuses on serving the general This sector focuses on constructing a brand
people of the country i.e. public welfare. image.

Capital is obtained by public revenue such

Capital can be obtained by issuing shares or
as taxes, bonds, other duties and many
loans in this sector.
more.

Extremely secured employment by This doesn’t ensure security of employment,

parameters of merit, progress or term of totally based on merit and production
working. output.

Q. What are the factors affecting the choice of suitable form of organization?
Ans: Factors that determine the choice of a form of organisation:

1. Cost and ease in setting up the organisation: For the initial cost, the sole
proprietorship is the preferred form as it involves the least expenditure.
2. Liability: In case of sole proprietorship and partnership firms, the liability of
the owners/ partners is unlimited. In Joint Hindu Family Business, only the Karta
has unlimited liability.
3. Continuity: In case the business needs a permanent structure, company form
is more suitable. For short-term ventures, proprietorship or partnership may be
preferred.
4. Management ability: A sole proprietor may find it difficult to have expertise in
all the functional areas of management. In other forms of organisations like
partnership and company, there is no such problem.
5. Capital consideration: Companies are in a better position to collect a large
amount of capital by issuing shares to a large number of investors. Partnership
firms also have the advantage of the combined resources of all partners.
6. Degree of control: If direct control over operations and absolute decision-
making power is required, a sole proprietorship may be preferred.