Current Affairs 11th Class

  Social Responsibilities of Business and Business Ethics   Facts that Matter  

• A business enterprise should do business in such a manner which fulfills the expectations of the society.
• Certain things are prohibited legally like supply of adultered goods, deceptive advertisements, making false information in advertisements, exploiting workers and polluting environment.
• There are certain things beyond it like providing healthy working conditions, supplying high quality goods, paying taxes honestly etc. These are called social responsibility of business which we shall discuss in this chapter.
• Business ethics are also important in this context.

  Meaning of Social Responsibility  

• Social Responsibility of business refers to its obligation to take those decisions and perform those actions which are desirable in terms of the objective and values of our society.
• It refers to the obligation of business towards various social groups like employees, consumers, investors, government etc.
• In the words of H. R. Bowen, "Social responsibility of business is to pursue those policies, to make those decisions or to follow those lines of action which are desirable in terms of the objectives and values of our society."

  Areas of Social Responsibility  

• Economic Responsibility: Business enterprises are economic units that exist to make profits. Therefore, it is the responsibility of every business enterprise to undertake economic activities such as producing goods and services according to the needs and wants of consumers and selling them at reasonable prices.
• Legal Responsibility: It is the responsibility of every business to respect the laws and regulations of the country in which it operates, as laws are formed for the betterment of society.
• Ethical Responsibility: This responsibility implies that a business enterprise should follow only those business practices that are in line with the social values that are desirable from the viewpoint of society. This includes respecting religious sentiments and producing quality products.
• Discretionary Responsibility: This responsibility is completely voluntary in nature. It means that a business enterprise may choose to open a charitable school or hospital for the poor, grant aid to people affected by natural calamities, provide employment opportunities to the physically challenged and so on.

  Arguments for Social Responsibility   Business enterprises must assume social responsibility because of the following reasons:

• Justification for existence and growth: It is justified for growth and existence of business.
• Long-term interest of the firm: It is in the long term interest of business.
• Avoidance of government regulation: If social responsibility is fulfilled, government intervention can be minimised.
• Maintenance of society: It is necessary to maintain society in a crime free manner.
• Availability of resources with business: Business has financial and human resources to fulfill it.
• Converting problems into opportunities: It converts problems into opportunities.
• Better environment for doing business: It provides better environment for doing business because when interest groups are satisfied, they cooperate in a better way.
• Holding business responsible for social problems: Non-compliance with social responsibility makes business responsible for social problems like corruption, forgery, more...

  Sources of Business Finance   Facts that Matter  

• No business can be started, run or expanded without finance.
• There are many sources of finance. Each source has its own merits and demerits.
• Business needs to choose right source of finance to make the best use of it.

  Business Finance               It refers to the money required for carrying out business activities.   Significance of Business Finance  

• Business is concerned with production and distribution of goods and services for the satisfaction of needs of society.
• No business can be carried without availability of adequate funds.
• As soon as a decision is taken to start a business, requirement of funds initiates.
• Finance is called 'life blood of a business'.
• It is very important to assess financial needs of the organization and the identification of various sources of finance.

  Classification of Sources of Funds   Overall financial requirements can be classified into:   Ø  Fixed Capital Requirements Ø  Working Capital Requirements. 

• Fixed capital is a capital used to buy land and building, plant and machinery, furniture and fixtures etc.
• Working capital requirements refer to capital required for meeting running expenses of business.

        On the basis of period, funds can be categorized into Ø Long term sources Ø Middle term sources Ø Short term sources 

• Long term sources fulfil the financial requirements of an enterprise for a period exceeding 5 years.
• Middle term sources fulfil the financial requirements of an enterprise for a period of one to five years.
• Short term sources fulfil the financial requirements of an enterprise for a period not exceeding one year.

        On the basis of ownership, funds can be classified into Ø  Owner's Funds Ø  Borrowed Funds  

• Owner's funds are the funds that are provided by the owners of an enterprise.
• Borrowed funds refer to the funds raised through borrowings.

    Equity Shares   Equity shares are those shares which do not carry any special or preferential rights in respect of payment of annual dividend and repayment of capital.   Merits of Equity Shares  

• It is ideal for adventurous investors
• There is no obligation as to dividend
• It provides credit standard
• It is a source of fixed capital
• It creates no charge on assets
• It creates democratic management
• It has a small nominal value

Limitations of Equity Shares  

• There is risk of fluctuating returns
• It leads to dilution of capital
• It has many legal formalities
• Equity shares capital has high cost of capital
• It suffers from the danger of over-capitalisation

  Preference Shares   Preference shares are those more...

  Small Business   Facts that Matter  

• Businesses can be classified on the basis of size into small, medium and large scale businesses.
• Small business has its own problems and they need some special help from Government to survive in the market.

  Entrepreneurship Development  

• Entrepreneurship development is the process of improving the skills and knowledge of entrepreneurs through various training and classroom programs. The whole point of entrepreneurship development is to increase the number of entrepreneurs.
• By doing this, the pace at which new businesses or ventures are made gets better. On a wider level, this makes room for employment and improves the economy of a business or country. The steps below will explain how to create an effective entrepreneurship development program and how to go about enhancing it

  Startup Policy  

• Prime Minister Narendra Modi launched the "Start-Up India Action Plan" that aims to enable an eco-system to promote and nurse entrepreneurship across the country.
• According to DIPP

- Startup means an entity, incorporated or registered in India: - Not prior to seven years, however for Biotechnology Startups not prior to ten years, -With annual turnover not exceeding INK 25 crore in any preceding financial year, and -Working towards innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation - Provided that such entity is not formed by splitting up, or reconstruction, of a business already in existence. Provided further that a Startup shall be eligible for tax benefits only after it has obtained certification from the Inter-Ministerial Board, setup for such purpose.   Intellectual Property Rights  

• Intellectual property rights are the rights given to persons over the creations of their minds. They usually give the creator an exclusive right over the use of his/her creation for a certain period of time.
• Intellectual property rights are customarily divided into two main areas:

(i) Copyright and rights related to copyright. (i) Industrial property

• Intellectual Property (IP) systems can be critical in helping new ventures transform their innovation potential and creativity into market value and competitiveness.
• Intellectual Property rights (IPR) allow innovative entrepreneurs to protect their inventions.
• Effective IP systems can facilitate access to finance and the development of markets for technology, both of which help innovative entrepreneurship. Such systems also provide incentives to invest in R&D and innovation, and can encourage technology co-operation with firms, universities and PRIs.

  Village and Small Sector Industries  

• In India "Village and Small Sector Industries Sector' consists of traditional as well as modern small industries.
• It has eight sub-groups:

Ø  Handlooms Ø  Handicrafts Ø  Coir Ø  Sericulture Ø  Khadi more...

  Internal Trade   Facts that Matter  

• Trade refers to buying and selling of goods with a view to earning profits.
• On the basis of geographical area, it may be internal trade or international trade.
• Trade which takes place within the boundaries of a country is called internal or home trade.
• Trade which takes place between two or more countries is called international trade. Internal Trade
• It refers to buying and selling of goods and services within the geographical boundaries of the country.

  Types of Internal Trade  

• Wholesale Trade
• Retail Trade

  Wholesale Trade  

• It refers to buying and selling of goods and services in large quantities for the purpose of resale or intermediate use.

  Services of Wholesalers to Manufacturers  

• It helps in facilitating large-scale production.
• It helps in bearing risk.
• It provides financial assistance.
• It provides expert advice.
• It helps in the marketing function.
• It facilitates continuity.
• It provides storage facilities.

  Services of Wholesalers to Retailers  

• It ensures availability of goods.
• It provides marketing support.
• It allows grant of credit.
• It provides specialized knowledge.
• It contributes in risk sharing.

  Retail Trade  

• It refers to buying and selling of goods and services in relatively small quantities from wholesalers and selling them to the ultimate consumers.

  Services of Retailers to Manufacturing and Wholesalers  

• It ensures regular availability of products.
• It provides new products information.
• There is convenience in buying.
• It provides wide selection.
• It provides after-sale services.
• It provides credit facilities.

  Types of Retail Trade   Retail Trade may be classified into two main categories:  

• Itinerant Retailers: These retail traders keep on moving from place to place to sell their goods.
• Fixed Shop Retailers: These retail traders operate their business from permanently established shops.

  Types of Itinerant Retailers  

• Hawkers and Peddlers: The hawkers carry their goods in a wheeled vehicle while the peddlers carry the goods on their heads or backs.
• Market Traders: These retailers open their shops at different places on fixed days.
• Street Traders or Pavement Vendors: These retailers display their goods at busy street corners or pavements.
• Cheap Jacks: These retailers generally hire a small shop in a residential colony for a temporary period.

  Types of Fixed Shop Retailers   On the basis of size of operation, the fixed shop retailers can be classified into two types:

• Fixed Shop Small Retailers
• Fixed Shop Large Retailers

  Types of Fixed Shop Small Retailers  

• General Stores: These shops deal in different types of goods which are needed by local residents in their day- to-day life.
• Single Line Stores: These shops deal in a single product line such as readymade garments, shoes, computer, books, etc.
• Specialty Shops: These shops specialise in sale of a specific product under one product line. For e.g., garment store dealing in men's wear only.
• Street more...

  International Trade - I   Facts that Matter                                         

• Self-reliance was the goal of economies in the beginning of 20th century. But since the formation of WTO, countries are now getting involved in trade with each other at a very large scale.
• The biggest reason behind it is the development of technology in the form of fast modes of transportation, communication, information and technology etc.
• The number of firms which are engaged in international business is increasing day by day. The extent is such that we are calling the world to be "Global Village".
• India is not an exception to the phenomenon. India also embarks on the path of globalisation.

  Meaning of International Business  

• International business means carrying on business activities beyond national boundaries. These activities normally include the transaction of economic resources such as goods, capital, services (comprising technology, skilled labour, and transportation, etc.), and international production. It refers to that business activity that takes place beyond the geographical limits of a country.
• Production may either involve production of physical goods or provision of services like banking, finance, insurance, construction, trading, and so on.
• Thus, international business includes not only international trade of goods and services but also foreign investment, especially foreign direct investment.

  Features of International Business  

• It involves two countries.
• It makes use of foreign exchange.
• It requires legal documentation.
• It has a high degree of risk.
• It requires heavy documentation.
• It is time consuming.
• There is lack of personal contact.

  Differences between Domestic Business and International Business  

• Nationality of buyers and sellers: In case of domestic business, both the buyers and sellers are from the same country. But in international business, buyers and sellers are from different nationality.
• Nationality of other stakeholders: Employees, suppliers, customers, shareholders, partners, middlemen etc belong to different nationality in international business. Employees, suppliers, customers, shareholders, partners, middlemen etc belong to the same nationality in domestic business. Exceptions are possible.
• Risk: Degree of risk is higher in international business as compared to domestic business.
• Political System: International business is subject to political system of many nations. Domestic business is subject to political system of one country.
• Mobility of factors of production: Mobility of factors of production is less across countries. Mobility of factors of production is more within countries
• Currency: International business involves usage of foreign currency. Domestic business makes use of domestic currency.
• Consumers taste and preferences: International markets are heterogeneous in terms of taste and preferences of the customer. Domestic markets are more homogeneous in terms of taste and preference of the consumers.
• Business regulations and policy: International business is subject to rules, laws, policies, and taxation system etc of multiple countries. Domestic business is subject to rules, laws, policies, and taxation system etc of single country.
• Differences in business systems and practices: Business systems and policies are heterogeneous in two countries. Business system and policies are more homogeneous within a country.

more...

  International Trade-II   Facts that Matter  

• There is a lot of difference in selling goods locally and exporting them.
• There are many formalities like export and import license, insurance, shipment bills, insurance etc. which need to be fulfilled.
• Government also gives some incentives for export promotion like exemptions of taxes or duties, carrying out their import-export transactions in a less cumbersome environment.
• There are many institutions at international level like IMF, World Bank, WTO etc. for the development of trade amongst nations.

  Objectives of Export Trade  

• To sell surplus goods
• To make better use of resources
• To earn foreign exchange
• To increase national income to generate employment
• To increase government revenue
• To create international cooperation.

  Procedure of Export Trade   The various steps involved in exporting goods are as follows:  

• Receipt of enquiry and sending quotations: It is the first step in export wherein the perspective buyer sends an enquiry for the product and exporter sends reply in the form of a quotation.
• Receipt of order or indent: If the perspective buyer likes the quotations, he Sends indent which contains description of the goods to be ordered, prices to be paid, terms of delivery, packaging and marking details etc.
• Assessing importers credit-worthiness and securing a guarantee for payments:  Many exporters demand a letter of credit from importer to minimize the risk of bad debts. A letter of credit is a guarantee issued by importer's bank that it will honour the payment upto the amount mentioned in letter of credit.
• Obtaining Exports License: A bank has to undergo following procedures to obtain export license.

Ø  Exporter needs to open an account in any bank authorised by Reserve Bank of India and get an account number. Ø  Then he needs to obtain Import Export Code (IEC) number from the Directorate General Foreign Trade (DGFT) or Regional Export Import Authority of India. Ø  Then he needs to register with Appropriate Export Promotion council. Ø  Then he needs to register himself with Export Credit and Guarantee Corporation in order to protect himself against risks of non-payments.

• Obtaining pre-shipment Finance: As soon as order is confirmed and letter of credit is received, the exporter approaches the bank to receive pre-shipment finance which he needs to buy raw materials and other inputs to produce goods to be exported.
• Excise Clearance: Exporter needs to apply to the concerned officer who is Excise Commissioner in the region for a clearance. Many commodities are exempted from excise duty.
• Obtaining certificate of Origin: The Certificate of Origin acts as a proof that the goods are actually manufactured in the country from where they are being exported.
• Reservation of Shipping Space: After this the exporting company applies to the shipping company for provision of shipping space. On acceptance more...

  Evolution and Fundamentals of Business   Facts that Matter  

• People need different types of goods and services wherever they live.
• Most of the businesses aim at earning money by satisfying people's demand for goods and services.
•  Business influences our daily life in many ways. 
• In 1000 AD South Asia contained an estimated 75 of the world's 267.33 million people (28.05%), and who individually generated an estimated average of 450 (1990 dollars) PPP per annum, and collectively produced 33,750 million, of the world's 121,208 million (27.84%), the largest regional contribution.
• First estimation of India's national income by Dadabhai Naoroji in 1868.
• In 1952, India's economy had a 3.8% share of world income.
• In 2014, India's economy is 7.376 trillion (purchasing power parity), the third largest in the world in terms of real GDP.

  History of Commerce in India  

• History of commerce can be traced back to the very start of transaction in prehistoric times.
• Even under barter system trading existed. Taxes were also levied by kings in the form of goods and services. 
•  Historian Peter Watson and Ramesh Manickam dates the history of long-distance commerce from circa 150,000 years ago
• In historic times, the introduction of currency as a standardized money, facilitated a wider exchange of goods and services.
• The circulation of a standardized currency provides a method of overcoming the major disadvantage to commerce through use of a barter system, the "double coincidence of wants" which means if you want something from a person, that person should also be in need of a thing or a service which you can provide, necessary for barter trades to occur.

  Indigenous Banking in India  

• From the ancient times in India, an indigenous banking system has prevailed. The businessmen called Shroffs, Seths, Sahukars, Mahajans, Chettis etc. had been carrying on the business of banking since ancient times.
• These indigenous bankers included very small money lenders to shroffs with huge businesses, who carried on the large and specialized business even greater than the business of banks.
• Indigenous bankers do not constitute one homogeneous category. The Banking Commission (1972) had grouped them under four main sub-groups Gujarati shroffs, Shikarpuri or Multani shroffs, Chettiars of the South, and Marwari Kayas of Assam.

  Indigenous Bankers and Commercial Banks  

• The indigenous bankers do not normally have contacts with other joint stock banking institutions in the country. Because, they are operating mostly on their own funds and not depend upon deposits from the others. Previously, during the busy seasons, they used to rediscount the bills with commercial banks and thus, the funds from the original sector of the money market pass more...

Forms of Business Organisation   Facts that Matter  

•  Business activities cannot be performed in isolation. They need to be given a proper form.
• A business enterprise is an institutional arrangement to perform any business activity.
• The most appropriate form is determined by weighing the merits and demerits of each type of organization against one's own requirement.
• The revolutionary new concept of "One Person Company' (OPC) has been introduced by the Companies Act, 2013.
• This concept of OPC was first recommended by the expert committee of Dr. JJ Irani in 2005

  Classification       In case of corporate form of private enterprises the identity of the enterprise is a separate legal entity from that of the owner and in case of non-corporate form, the identity of the enterprise is not different from that of its owners.   Sole Proprietorship   Sole proprietorship refers to a form of business organization which is owned, managed and controlled by an individual who is the recipient of all profits and bearer of all risks.   Features of Sole Proprietorship  

•  It has easy formation and closure.
• It has unlimited liability.
• Owner is sole risk bearer and profit recipient.
• Owner has 100% control.
• There is no separate entity.
• There is lack of business continuity.

  Merits of Sole Proprietorship  

• It helps in quick decision making.
• It helps in confidentiality of information.
• It has direct incentive.
• It has sense of accomplishment.
• There is ease of formation and closure.

  Limitations of Sole Proprietorship  

• It has limited resources.
• It has limited life of a business concern.
• It has unlimited liability.
• It has limited managerial ability.

  Suitability    Sole proprietorship is suitable in following cases:

• Where the personal attention to customer is required as in tailoring, and beauty parlour.
• Where goods are un-standardized like artistic jewellery.
• Where modest capital and limited managerial skills are required as in the case of a retail store.

  JOINT HINDU FAMILY BUSINESS  

• It is owned by the members of the undivided joint Hindu family and managed by the eldest member, known as KAETA.
• It is governed by the provisions of Hindu law.
• The basis of membership is birth in a particular family.
• There are two systems of JHF Business-

Ø  Dayabhaga System: It is prevailing in West Bengal?both male and female members can become co - parceners. Ø  Mitaskshara System: It is prevailing all over India, except West Bengal. It allows only male members to become co - parceners.   Features  

• Formation: For a Joint Hindu family business, there should be at least two members in the family and some ancestral property to be inherited by them.
• Membership: more...

  Private, Public and Global Enterprises   Facts that Matter  

• If we look around our neighborhood, we can find shops owned by sole proprietors or big retail organizations or partnership firms etc.
• Similarly, there can be privately owned businesses or government owned organizations. There may be organizations which operate in more than one nation. These are called global enterprises.
• Organizations owned by private people are a part of private sector. Organizations owned by government are included in public sector. Organizations operative in more than one nation are called global enterprises.

  Private Sector and Public Sector  

• The private sector consists of business owned by individuals or a group of individuals.
• Private sector includes sole proprietorship, partnership, Joint Hindu Family system, cooperative and company.
• Public sector consists of various organizations owned and managed by the government either wholly or partly by the central or the state government. These may be part of a ministry or come into existence by a special act of the Parliament.
• Till 1991, public sector had a leading role in India. Since then private sector has been given a major role.
• Since 1991, multinational corporations or global enterprises which operate in more than one nation gained entry into the Indian economy. Therefore, at present India has private sector, public sector and global enterprises.

  Forms of Organizing Public Sector Enterprises  

• Departmental undertakings.       
• Statutory Corporation.
• Government Companies.

  Forms of Organizing Private Sector Enterprises  

• Sole proprietorship.
• Partnership.
• Joint Hindu Family.
• Cooperatives.
• Company - Private Limited and Public Limited.
• Multinational Corporations.

  Departmental Undertakings  

• These are the oldest and most traditional form of public sector enterprises which have been established by the Departments of the Ministry and are considered parts or an extension of ministry itself.
• They are not autonomous or independent legal institutions. They act through the government.
• Examples of these undertakings are Railways and Post and Telegraph Department.

  Features  

• These undertakings are funded directly from the government treasury and are appropriated funds from annual budget of the government. The revenue earned by these enterprises also goes to the government treasury.
• All accounting and audit control which apply to other government activities are also applicable to them.
• Its employees are government employees and the conditions of their recruitment and services are same as that of government employees.
• These undertakings are headed by the Indian Administrative Services (IAS) and Civil Services.

  Merits

• There is complete government control.
• These are answerable to Parliament.
• They are a source of income.
• They are suitable from national security point of view.

  Demerits  

• There is lack of flexibility.
• There is delay in decision making.
• There is conservative approach.
• There is red tapism.
• There is undue government intervention.
• These undertakings do not pay attention to consumer needs.

  Statutory Corporation  

• Statutory Corporations are Public Enterprises brought into existence by more...

  Business Services   Facts that Matter  

• In all business activities it is either a good which is being transacted or a service which is being experienced.
• Services are certainly intangible. Their purchase does not lead to creation of anything physical.
• Business services mean those services which help in the successful running of a business. Business cannot be even imagined in the absence of these services. For example; banking, insurance, transport, warehousing and communication.
• Digital payments are the mode of payment for online commerce.
• There are too many good UPI apps available such as BHIM, SBI UPI, HDFC UPI, iMobile, Phone Pe etc.
• AEPS uses your fingerprint as a password. No one can forge your fingerprints, thus it is the most secure digital payment mode.
• We need not have a smartphone or internet connection to use USSD banking. We can easily use it with any normal feature phone. USSD banking is as easy as checking your mobile balance.
• Credit cards are issued by banks and some other entities authorized by RBI.
• E-wallet or mobile wallet is the digital version of your physical wallet with more functionality.

  Nature of Services  

• Features: Services are explained by five Ps namely; Intangibility, Inconsistency, Inseparability, Inventory and Involvement.
• Intangibility: Services are intangible i.e., they cannot be touched. They can only be experienced.
• Inconsistency: The second important characteristic of services is inconsistency.
• Inseparability: Production and consumption of services take place simultaneously. It is possible to manufacture a chair today and sell it later but in case of services it has to be simultaneous.
• Inventory: Services have no inventory as they can't be stored.
• Involvement: Consumer gets involved in production of services and gets the opportunity to get the services modified as per his specific requirement.

  Types of Services  

• Social Services: These services are provided voluntarily to achieve certain goals. For example, health care and education services provided by NGOs.
• Personal Services: Services which are experienced differently by different customers are called personal services. For example, tourism, restaurants etc.
• Business Services: Services used by business enterprises for the conduct of their business activities. For example, banking, insurance, communication, warehousing and transportation.  

                                    Banking   Bank means a company accepting deposits of money from public (for lending and investment), repayable on demand and withdrawal by cheque or otherwise.                E - Banking   Meaning: Banking using electronic media i.e., Internet with personal computer, laptop, more...