Class

11
Business Studies
Chapter 1

Business,
Trade &
Commerce
 Section 1

History of Trade and

Commerce
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
 IndigenousBanking 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
 IndigenousBanking 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
 IndigenousBanking 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

Payable to any persons – no liability over who received

Dhani-jog
the payment

Darshani Payable to a specific person (someone

Sah-jog
respectable). 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
 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
 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

Ajith Kanthi Wayanad

www.hssplustwo.blogspot.com
 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
 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

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

It had trade connections with Taxila and

 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
Madura City in Tamil Nadu
It was the capital city of Pandya dynasty who
controlled the trade of pearl and fisheries of the
Gulf of Mannar (shallow in between India and Sri
Lanka)
 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
 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
Imports
Ajith Kanthi Wayanad
www.hssplustwo.blogspot.com
 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

Ajith Kanthi Wayanad

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

Business refers to an occupation in which people

regularly engage in activities related to purchase,
production and / or sale of goods and services with
a view to earn profits
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

These activities can be classified into two, they are

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

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

Economic Non-Economi
Activities c Activities
 Types of
Economic
Activities

Ajith Kanthi Wayanad

www.hssplustwo.blogspot.com
 Types of Economic
Activities

Business Profession Employment

Characteristics of
Business

Ajith Kanthi Wayanad

www.hssplustwo.blogspot.com
 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
Comparison of Business
Profession & Employment

Ajith Kanthi Wayanad

www.hssplustwo.blogspot.com
Business– Profession - Employment

1 Mode of establishment

Business Profession Employment

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
qualification employer
and training
Business– Profession - Employment

4 Reward of return

Business Profession Employment

Salary or
Profit Fees
Wage
Business– Profession - Employment

5 Capital investment

Business Profession Employment

Large capital Limited

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

6 Risk

Business Profession Employment

High Little No
Risk Risk Risk
Business– Profession - Employment

7 Transfer of interest

Business Profession Employment

Not Not
Transferable
Transferable Transferable
Business– Profession - Employment

8 Code of conduct

Business Profession Employment

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

9 Examples:

Business Profession Employment

Jobs in banks,
CA, Legal, insurance,
Shop, Factory Medical Govt.
etc. Profession etc. departments
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
Providing goods and personalized and
2 Nature of work 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 body employer

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

Ajith Kanthi Wayanad

www.hssplustwo.blogspot.com
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
Types of
Industries

Ajith Kanthi Wayanad

www.hssplustwo.blogspot.com
 Types of Industries
Primary Industry

Engaged in extracting, producing and

processing of natural resources

Eg: Extractive industries

and genetic industries
Classification of Primary
Industries

Ajith Kanthi Wayanad

www.hssplustwo.blogspot.com
Classification of Primary Industries
Extractive
Industries
They are engaged in the extraction
( collection) of useful materials from the
earth and sea

Eg: Mining, 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
 Classification of
Secondary
Industries

Ajith Kanthi Wayanad

www.hssplustwo.blogspot.com
 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

Ajith Kanthi Wayanad

www.hssplustwo.blogspot.com
 Types of Manufacturing
Industries
a Analytical Industries

Analyses and
separates
different elements
from the same
materials
 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.
Commerce
Ajith Kanthi Wayanad
www.hssplustwo.blogspot.com
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

Trade Aids to
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
Ajith Kanthi Wayanad
www.hssplustwo.blogspot.co
m
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

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
 Make in India
It is an initiative launched by the Government
of India on 25th September 2014, to encourage
national and multinational companies to
manufacture their products in India.
 Make in India
Its major objectives are job creation
and skill enhancement in 25 sectors of
the economy.
Some of them are, Automobile, Aviation, Biotechnology,
Chemicals, Construction, Defense, Electrical
Machinery, Food processing, I T, Oil and Gas, Media
and Entertainments, Mining, Railways etc.
Trade

Ajith Kanthi Wayanad

www.hssplustwo.blogspot.com
 Trade

Buying and selling of goods, which involves the

exchange of commodities for money or
money’s worth
Types of
Trade

Trade

Home Foreign
Trade Trade
 Types of
Trade

Home
It isTrade
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 Trade
 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
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
Entrepot
c
Importing goods from one country for the
purpose of exporting them to some other
countries

England India China

 Types of
Trade

Home Foreign
Trade Trade

Wholesale Retail
Trade Trade

Export Import Entrepot

Trade Trade Trade
AidstoTrade
(AuxiliariestoTrade)

Ajith Kanthi Wayanad

www.hssplustwo.blogspot.com
AidstoTrade

The activities which assist trade are

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

These service enterprises facilitate

movements, finance, risk coverage, storage,
and sales promotion of goods
 AidstoTrade
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
AidstoTrade
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
AidstoTrade
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
AidstoTrade
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
AidstoTrade
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
AidstoTrade
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
AidstoTrade
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
Objectivesof
Business
Ajith Kanthi Wayanad
www.hssplustwo.blogspot.com
 ObjectivesofBusine
a s
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
 ObjectivesofBusine
b s
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
 ObjectivesofBusine
c s
Productivity
Every enterprise should aim at greater
efficiency and productivity by the best use of
available resources
 ObjectivesofBusine
d s
Physical andfinancial resources
Acquiring physical resources like buildings,
plant and machinery, offices etc. and financial
resources or fund for its operations and ensure
its efficient use
 ObjectivesofBusine
e s
Earning profits
Profit is regarded as the life-blood of a
business to survive and to make growth and
development of the enterprise
 ObjectivesofBusine
f s
Manager performance and
development
The enterprise should take much initiative to
improve the efficiency of its managers by
conducting various programs to motivate them
 ObjectivesofBusine
g s
Worker performance and attitude
Every enterprise should aim at improving its
workers performance and their positive attitude
 ObjectivesofBusine
i s
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
 ObjectivesofBusiness
a) Market Standing
b) Innovations
c) Productivity
d) Physical and Financial
Resources
e) Earning Profits
f) Manager Performance
g) Worker Performance
h) Social responsibility
BusinessRisk

Ajith Kanthi Wayanad

www.hssplustwo.blogspot.com
 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
 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.
Pl oid
tic

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
 Methodsof
dealingwithRisk

Ajith Kanthi Wayanad

www.hssplustwo.blogspot.com
 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
BusinessRisk

Ajith Kanthi Wayanad

www.hssplustwo.blogspot.com
 CausesofBusinessRisk
1
Natural Causes
Risk due to natural calamities

It may include damages from flood, fire,

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

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

 CausesofBusinessRisk
3
Economic Causes
It includes uncertainties relating to demand for
products, competition, price, change in
technology, rise in interest rate, higher taxes
etc.
 CausesofBusinessRisk
4
Other Causes
Political disturbances, mechanical failures,
change in exchange rates, etc. come under
this category
 Natural
Causes

Other Causes Human

Causes of Risk Causes

Economic
Causes