11th Class Business Studies Nature And Purpose Of Business

  • question_answer 19)
    Describe the activities relating to commerce.


    Commerce includes two types of activities, viz., (i) trade and (ii) auxiliaries to trade. Buying and selling of goods is termed as trade. On the other hand, activities that are required to facilitate the purchase and sale of goods are called services or auxiliaries to trade. The various activities included in commerce are discussed below (i) Trade The hindrance of persons is removed by trade thereby making goods available to the consumers from the producers. Trade is an essential part of commerce. It refers to sale, transfer or exchange of goods. It helps in making the goods produced available to ultimate consumers or users. Businessmen are engaged in trading activities as middlemen like wholesalers and retailers to make the goods produced at a large scale in one place, available to consumers in different markets. Trade may be internal or external. (ii) Auxiliaries to Trade Activities which are meant for assisting trade are known as auxiliaries to trade. These activities are generally, referred to as services because these are in the nature of support service facilitating the activities relating to industry and trade. These activities help in removing various hindrances which arise in connection with the production and distribution of goods. Auxiliaries to trade are briefly discussed below (a) Transport and Communication Transport removes the hindrances of place. Transport facilitates through road, rail or coastal shipping facilitate movement of raw material to the place of production and the finished products from factories to the place of consumption. Along with the transport facility, there is also a need for communication facilities to enable the producers, traders and consumers to exchange information with one another. Thus, postal services and telephone facilities are also regarded as auxiliaries to business activities. (b) Banking and Finance Capital required to acquire assets and meeting the day-to-day expenses is provided by banking and financing institutions. Commercial banks lend money to business organizations by providing: loans and advances. Banks also undertake collection of cheques, remittance of funds to different places, and discounting of bills on behalf of traders. In foreign trade, payments are arranged by commercial banks on behalf of importers and exporters. (c) Insurance The risk of loss or damage to the factory building, machinery, furniture, goods held in stock or goods in course of transport due to theft, fire, accidents, etc is removed by insurance of goods. By payment of a nominal premium, the amount of loss or damage and compensation for injury, if any, can be recovered from the insurance company. (d) Warehousing Storage and warehousing activities remove the hindrance of time by facilitating holding of stocks of goods to be sold as and when required. Warehousing helps business firms to overcome the problem of storage to prevent loss or damage and facilitates the availability of goods when needed. Continuous supply of goods and thus stable prices can thus be maintained. (e) Advertising Advertising makes it possible for producers and traders to promote the goods and services available in the market thus removing the hindrance of information. It is practically impossible for producers and traders to contact each and every customer. Advertising helps in providing information about the goods available, its features, price, etc, and inducing customers to buy particular items.

You need to login to perform this action.
You will be redirected in 3 sec spinner