Chapter 1 — Foundations of Business

Chapter 1, titled Business, Trade and Commerce, covers the concept and characteristics of business, the historical development of trade in the Indian subcontinent, classification of business activities into industry and commerce, objectives of business, the nature and causes of business risks, and the basic factors to consider when starting a business.

According to NCERT Class 11, 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 earning profits. The term business is derived from the word 'busy', meaning being busy.

Economic activities are those by which we can earn our livelihood, whereas non-economic activities are performed out of love, sympathy, sentiment, or patriotism. For example, a worker working in a factory is engaged in an economic activity, while a housewife cooking food for her family is performing a non-economic activity.

Economic activities are divided into three categories: business (involving production and sale of goods and services for profit), profession (rendering personalised expert services in exchange for a professional fee), and employment (performing work as per a service contract in exchange for salary or wages).

Industries are divided into three broad categories: primary industries (extractive and genetic), secondary industries (manufacturing and construction), and tertiary industries, which provide support services to primary and secondary industries and include transport, banking, insurance, warehousing, communication, packaging, and advertising.

Auxiliaries to trade are activities that assist and facilitate trade and industry. They include transport and communication, banking and finance, insurance, warehousing, and advertising and public relations. These activities help remove hindrances of place, time, risk, finance, and information in the process of exchange.

Speculative risks involve both the possibility of gain as well as the possibility of loss, arising due to changes in market conditions such as fluctuations in demand, supply, or prices. Pure risks involve only the possibility of loss or no loss; examples include the chance of fire, theft, or strike whose occurrence may result in loss, whereas non-occurrence means absence of loss rather than gain.

Profit is an essential objective of business. It is a source of income for business persons, a source of finance for expansion, an indicator of efficient working, a sign of society's approval of the utility of business, and it helps build the reputation of a business enterprise. Profit is also described as the reward for risk taking.

Hundi, which literally means 'to collect', was a document written in vernacular language used as an instrument of exchange in ancient India. It facilitated the safe transfer of money between parties during long-distance trade, avoiding the risk of theft and robbery during travel by land or sea. It involved an unconditional promise or order for payment capable of transfer by valid negotiation.

The chapter identifies eight key factors: selection of type of business, size of business, location of the enterprise, financing the proposition, physical facilities, competent and committed workforce, tax planning, and formally launching the enterprise by mobilising resources and starting the production and sales promotion process.

The characteristics of business activities are: it is an economic activity, it involves production or procurement of goods and services, it requires sale or exchange of goods and services, dealings must be on a regular basis, it aims at profit earning, it carries uncertainty of return, and it involves an element of risk that cannot be altogether eliminated.

Business risk refers to the possibility of inadequate profits or even losses due to uncertainties or unexpected events. Risk is an essential part of every business, arises due to uncertainties, and its degree depends mainly upon the nature and size of the business. Risk can be minimised but cannot be eliminated.

Yes, the NCERT Class 11 Business Studies Chapter 1 PDF is free to download on cbseprepmaster.com. No sign-up or account is required.