BUSINESS

ORGANISATION
 What is Business and Business
Organization?
 Business refers to all those activities which are concerned
with production/purchase and sale of goods and services
for earning profit or for an economic motive.
 A business organization is a person or a group of people
working together in pursuit of the same commercial
interest.
 It is an art of establishing effective cooperation between
the various means of trade, commerce and industry for
their development.
TYPES OF ACTIVITIES IN A
BUSINESS ORGANIZATION
• The categorization of business activities has been done under three sub-heading, which
are as follows-
• Operational Activity
• Investment Activity
• Financing Activity
 Operational Activities
• Operating activities are the functions of a business directly related to
providing its goods and services to the market. These include the core
business activities, such as manufacturing, distributing, marketing, and
selling a product or service.
• They generally provide the majority of a business’s cash flow and largely
determine whether it is profitable or not.
• Some common operating activities include cash receipts from goods sold,
payments to employees, taxes, and payments to suppliers.
• These activities are found in the financial statements, and in particular
the income statement and cash flow statement.
 Investment Activities

 Investing activities are the second main category of net cash

activities listed on the CFS(Cash Flow Statement) and consist of
purchase and sale of long-term assets and other investments.
 This basically shows the net amount of cash received and paid
during an accounting period for long-term assets and investments.
 These accounts to both negative and positive cash flows.
 Examples of these activities are as follows:
 Purchase and sale of property, plant, equipment wherein purchase
accounts to negative cash flows while sale accounts to positive
cash flows. Apart from this any type of long term investment come
under this activity.
 Financing Activities

 Financing activities are transactions or business events that affect long-

term liabilities and equity.
 The basic purpose behind the financing activities is either expansion of
business or to fund the operations of the organization. It shows how a
business cope with requirements of the two situations i.e., expansion or
operations externally.
 These activities are also in the form of inflows and outflows.
 If a business takes loan from the creditor it accounts to cash inflow while if
loans are issued then it will lead to cash outflows, whenever new stocks are
issued or any new contributions are made it will lead to inflow whereas,
payment of interests and dividends account to cash outflows.
 Commerce:- Activities concerned with
facilitating the purchase and sale of goods,
exchange of commodities and distribution of
finished products.
 It includes all the processes like storing, grading,
packaging, financing, insurance, transporting
etc.
 Storage as the diagram shows is a part of
commerce.
■ Trade:- It is an art by which the goods and services reach
out to the customers from the manufactures. The person
who carries out this activity is called a trader.
■ Trading usually represents the supply side of good and
services.
■ Classification of trade:
Objectives of business organization
• Profitability:- The basic objective of every business enterprise is to earn profit
through its operations. Profit not only helps an organization to grow and expand
but also it is necessary for the survival.
• Productivity:- All the business enterprises aims at increasing productivity, which
means they aim to increase the output per worker and fully utilize the resources.
• Customer Service:- Since every business is dependent on its customers so providing
efficient and effective services is also amongst the objectives of an organization.
• Growth:- Every business organization is highly ambitious in nature.
They always try to expand its organization and grow and so they keep
working towards the improvement of its operations.
• Financing:- Financing is also amongst the objectives of a business
activity. They need finance not just to grow and expand but also to
survive. Finance is the basic need of every organization.
• Marketing:- Marketing is the need of every business organization. This
is done to mark their presence in the market. Also, any product or
service cant attain market share without proper marketing and
promotion.
• Competitive Analysis:- For any business it becomes a tool for fostering
intensive growth. Competitive analysis facilitates the business to
understand the market and competitors well. It also help them to
understand the shortcomings in case the end result differs from the
planned outcome so that they can work on them.
Characteristics of a Business
organization
 Economic Activity:-Business is an economic activity of production
and distribution of goods and services. It provides employment opportunities
in different sectors like banking, insurance, transport, industries, trade etc. It
brings about industrial and economic development of the country.

 Buying and Selling:- The business involves buying of raw material,

plants and machinery, stationary, property etc. On the other hand, it sells the
finished products to the consumers, wholesaler, retailer etc.

 Continuous Process:- Business is not a one time activity. It is a

continuous process of production and distribution of goods and services. A
single transaction of trade cannot be termed as a business.
 Profit Motive:- Every business runs for a profit which is the
difference between the income and the expenditure. Profit
not only helps it to grow but also facilitates in its survival.
 Risks and Uncertainties:- In business there is always a risk of
loss because future happenings cant be seen and even if we
predict about it, the prediction may go against us. The
business environment too keeps on changing and is
uncertain.
 Creative and Dynamic:-Modern business is creative and dynamic in
nature. Business firm has to come out with creative ideas, approaches and
concepts for production and distribution of goods and services. Organization has
to be innovative because the business operates under constantly changing
economic, social and technological environment
 Customer Satisfaction:- The approach of modern business is more
towards customer satisfaction rather than just earing profit. This is because now
the customers are well aware about the market and they have a wide variety of
options to choose from. So it is advisable for every business to work towards
customer satisfaction.
 Social Activity:-Business is a socio-economic activity. It has some
responsibility towards the society and in turn it needs the support of various
social groups like investors, employees, customers, creditors etc. By making
goods available to various sections of the society, business performs an important
social function and meets social needs.
 Government’s Control:-Business organizations are subject to government
control. They have to follow certain rules and regulations enacted by the
government. For example: Consumer Protection Act, Companies Act, etc.
 Optimum Utilization of Resource:-Business facilitates optimum
utilization of countries material and non-material resources and
achieves economic progress. The scarce resources are brought to
its fullest use for concentrating economic wealth and satisfying
the needs and wants of the consumers.