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Characteristics Of Business

The nature of business can be described in terms of the following characteristics:

1.    Economic Activity. Business is an economic activity or occupation as it consists of producing and purchase and sale of goods and services to earn income in the form of profits. It is concerned with the creation and acquisitions of wealth thought satisfaction of human wants. The purpose behind every business activity is to manufacture and sell goods at a profit. The are not performed voluntarily, i.e., without any expectation of reward or income.

2.    Production and/or Exchange. Every business is concerned with production and exchange of goods and services for value. Thus, goods produced or purchased for personal consumption or for presenting to others as gifts do not constitute business because there is no sale or transfer for value, For example, if a person cooks at home for personal consumption, it is not a business activity. But if he cooks for others in his restaurant and receives payment from them, it becomes his business.

3.    Dealing in Goods and Services. Business deals in goods and services. Goods produced and sold may be : (i) consumer goods such as bread, cloth, cold drinks and sugar, or (ii) capital goods such as tools and mechanics. Services include supply of water, electricity and gas, insurance, transportation, etc.

4.    Regularity and Continuity in Dealings. Regularity of economic transactions is the essence of business. There should be continuity or regularity of exchange of goods and services for money. An isolated transaction cannot be called a business. For example, if a person sells his house and earns some profit, it cannot be called a business. But if he purchases and sells houses regularly to earn his livelihood, it will be called his business.

5.    Profit Motive. The chief objective of a business is to earn reasonable profits. The survival of a business depends upon its ability to earn profits. Every businessman wants to earn profits to receive interest on his capital and to reward himself for his services. Actually, profit is the spur that helps in continuing the business. Profit is also essential for growth. Recreation cubs and religious institutions cannot be called business enterprises as they have noting to do with the profit motive.

6.    Uncertainty of Profit or Return. Every business requires some amount of money to be invested to run the activities. Profits are expected to be earned in proportion to the amount of investment in the business. But it is not certain that adequate profit will be earned. There is always a possibility losses being incurred inspire of best efforts. This is because the market conditions may changes because of severe competition, reduced sales and decreased profits.

7.    Business Risks. All business activities involve some element of risk and uncertainty. There may be uncertainty in regard to success of business, lasted of people, availability of raw materials and others factors when a businessman invests his resources in some business activity. There is no guarantee that he will be earning sufficient profits to reward himself and keep his capital intact. Thus, every business activity involves some degree of risk and uncertainty.

8.    Creation of Utility. All business activities create utilities for the society. Form utility is created when raw materials are converted into finished goods and services. Place utility is created when goods are transported from the place of production to the place of consumption. Storage of goods aerates time utility. This helps in keeping stock of goods to meet their demand in future.

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