CBSE Class 11 - Business Studies - Chapter 1 - Characteristics of Business (#cbseNotes)

Characteristics of Business

A business activity is different from other activities performed in a society. The essential characteristics of business are as follow:

① An economic activity
② Manufacturing or Purchase of Goods and Services
③ Sale or Exchange of Goods and Services
④ Deals in Goods & services on a regular basis
⑤ Aims at Profit Earning
⑥ Element of Risk:
⑦ Uncertainty of Return
⑧ Requires Investment




① An Economic activity:

The main objective of a business is to earn money, hence it is considered as an economic activity.

② Manufacturing or Purchase of goods and services: Business includes all the activities concerned with the production or procurement of goods or sell services. Services include transportation, banking, accounting, insurance etc.


③ Sale or Exchange of Goods and Services:

A business person produces goods or sells services to somebody, thus s/he is engaged in business.
There is a sale or exchange of goods and service between the seller and the buyer. Good produced or services are offered for self consumption or for gift, it cannot be called a business activity.


④ Deals in Goods & services on a regular basis:

The production or buying and selling activities must be carried out on a regular basis.  One
single transaction or sale or purchase cannot be considered as business activity. e.g. A person sells his motor cycle to another person, it is not considered as business. In case he repeats this selling, he is doing a business.


⑤ Aims at Profit Earning: 
The main purpose of business is to earn profit. A business cannot survive without making profits. So businessman. Earning of profit is also required to grow and expand the business.


⑥ Element of Risk:
In all business activities, there is uncertainty and a bit of risk involved regarding getting his rewards. e.g. business has no control over several factors like, strikes, fire , theft, change in  consumer taste, change in demand or supply etc.


⑦ Uncertainty of return:
The businessman who invests in various resources expects a fair amount of return. Every business invests money with the objective of earning profit but the amount earned may vary. It can be a loss or a profit.


⑧ Requires Investment:

Every business to begin with, requires some amount of investment. It can be in terms of land, labour, machinery or capital. These resources are consumed to produce goods and services for selling, distribution or consumption.