ADVANTAGES OF INSURANCE

                      What is Insurance?

Insurance is a contract to compensate the insured if certain specific events take place against specific payment of consideration. It is a coverage of risk on payment to the insurer. It can also be called a form of cooperation whereby one group compensates the other group or individual against consideration on the happening of a specific event.

1. Provides Security

Provides Security: 

Insurance gives security to both individuals and businessmen. There are many risk which are covered by parchasing insurance. For example, the building of a factory which is insured suddenly catches fire. The insurance company will idemnify for the actual loss or damage to property caused by fire. The financial loss of the policy-holder is thus offset in full or in part by the insurance company. The insurance company will pay the full amount of the loss of goods to the trader. Insurance thus provides safety against economic difficulties to the families and businessmen.

2. Optimum Allocation of Resources

Optimum Allocation of Resources: 

There are some enterprises which involve risks of fire, loss of goods in trainsit and are open to burglary, robbery, theft etc. If the businessmen are not able to buy the fire insurance or marine insurance or theft insurance, the resources of the country will not be invested to these enterprises which are exposed to risk. The insurance companies by giving coverage to the risky enterprises divert the resources to the risky business and creat competition among the producers. Thus diverting the resources to risky business, brings about the optimum, use of the scarce resources to the country.

3. Loss Prevention Activities

Loss Prevention Activities:

The insurance companies spend large sums of money every year to make the policy safety minded. They spend the money on medical research, health services, finding out causes of fire, theft, road accidents etc, and make the public aware through advertising as to how changes of losses can be minimized or eliminated. The insurance companies thus render a great service to the community by decreasing the chances of losses through loss prevention activities.

4. Provides Basis for Credit

Provides Basis for Credit: 

The businessmen pledge the inventories or th building for getting loan from commercial banks. If the building or the stock is insured, they can easily get loan from the banks, The insurance coverage, thus provides a good basis for credit to the business community.

5. Source of Capital Formation

Source of Capital Formation:

The insurance companies pool larg sums of money through premiums. They invest the capital in purchasing shares and debentures of financially sound companies. The capital of the insurance companies is thus utilized for the development of productive enterprises in the country.

6. Stabilizer of Organization

Stabilizer of Organization:

The insurance companies help in creating good will between the employers and the employees by providing group insurance to all the permanent employees of the company. They also introduce retirement income plans which ensures a regular income to the employees after their retirement. The monetary benefits given by the insurance companies to the employees of an organization greatly help in stabilization the organization.

6. Stabilizer of Organization

Stabilizer of Organization: 
The insurance companies help in creating good will between the employers and the employees by providing group insurance to all the permanent employees of the company. They also introduce retirement income plans which ensures a regular income to the employees after their retirement. The monetary benefits given by the insurance companies to the employees of an organization greatly help in stabilization the organization.

7. Covers Unforeseen Accidents

Covers Unforeseen Accidents: 

The insurance companies give proper coverage to the injury causing disability to the employee or the death of an employee on work oa a small periodic premium by the owner of the factory. The firm has not to bear the expenses of unforeseen accidents. The income of the firm, thus, remains stabilized through the insurance.

8. Spread of Risk

Spread of Risk:  

A large number of persons get marine, fire, life insurance policies and pay premiums to the insurance companies. whenever a loss occurs, it is compensated out of the funds of the insurers. The loss is spread among a larg number of policy holders. The insurance companies collect larg funds by way of premim. These funds are invested in government securities. The government thus gets sufficient loans easily for development purposes.

CONCEPT OF BUSINESS

In its literary sense, the term business means the state of being busy. Technically, the term Business is defined as all the commercial and industrial activities that provide goods and services to the people and are undertaken for profit. For example, a manufacturer who converts raw material into simi finished or finished goods (cotton to yarn to cloth).

A person who is engaged is fishing, poultry , mining with the sle objective to earn profit are carrying on the business activities. Similarly, all commercial occupations which deal with the buying and selling of goods on retail or wholesale basis, the financing of trad by banks, the transportation of goods from places where there are in less dmand to the places where they are more demanded for earning of profit are doing business. Thus business combines human, material, technological and financial resources carried on for profit.

ACTIVITIES EXCLUDED FROM BUSINESS

1) Social Service Activities:

There are certain human activities which do not seek profit. They are organized and operated with the sole object of rendering social dserviceto the society. For example, setting of free hospitals, free educational institutions, provision of freelgal services etc. Are provided by certain organizations purely for social benefits to the society. These and such other non-profit activities which are undertaken for the purpose other than of earning money or profit are excluded from the study of business.

2) Personal Consumption Activities

Personal Consumption Activities:

Similarly, all the activities which are concerned with the production or purchase of goods and services for personal consumption fall outside the scope of business. For instance, shoemaker making a pair of shoes for personal consumption or a tailor sewing shirts for his own use or a nurse nursing her own child are notbusiness activities because these do not involve in sale or transfer for value. However, if a shoemaker manufactures shoes for regular sale in  the market with a view to earn profit, it will be purely a business activity.

3) Illegal Activities

Illegal Activities:

The economic activities to be included in business must be legal. If a person earns money through smuggling or sale of heroine, or adulteration of goods etc. These activities being illegal and anti-social are excluded from the study of business.

DEFINITIONS AND CHARACTERISTICS OF BUSINESS

The term "Business has been defined differently by various writers. According to Urwick and Hunt, "Business is any enterprise which makes, distributes or provides any service which other members of the community need and are within to pay for it".

In the words of Davis, Business may be defined as an activity in which different persons exchange something of value whether goods or services for mutual gain or profit". Ronald defines business as "as an organization that produces or goods sells and services to make profit". Business thus is the sum of total activities which are connected with the production or perchase and sale of goods and services with the object to earn profit (profit is the difference between a business's revenues and its expenses). The persons who are engaged is business are named as business or entrepreneurs. An organization formed for carrying on business activities is called business organization.

CHARACTERISTICS OF BUSINESS:

      The Essential Characteristics or Features Of Business Are As Under:
1) Entrepreneur:

An entrepreneur is a person who combines the factors of production to produce goods and services for profit. The presence of an entrepreneur is essential in any business which may be operated on a small or on a large scale.

2) Deals in Goods And Services

Deals in Goods And Services:

Every business enterprise whether it is carried on a small or a large scale deals in goods and services. The goods may be consumer goods such as bread, butter, cloth, shoes, pens etc, or capital goods like plant, machinery, building, etc, or  it may take the shape of services like transportation , electricity, banking, insurance, advertising etc.

3) Involves Production or Exchange of Goods

Involves Production or Exchange of Goods: 

An important characteristic of business is that it involves production or sale of goods and services for earning of money. Any activity undertaken for personal consumption or for free distribution fall outside the scope of business. Business includes only economic activities.

4) Series of Deals

Series of Deals: 

Business consists of producing or purchasing and selling of goods on continous and regular basis. One or two stray or isolated transactions are not treated as business. A student, for instance, sells his old books in the market is not doing business. However, if he purchase old books and sells them is spare time on regular basis to earn profit, it will then be treated as business.

5) Desire to Earn Profi

Desire to Earn Profit: 

The primary aim of business is to earn profit. if an enterprise is to survive, grow and expand, it must yield profit. Profit making thus is an essential element of business.

6) Creation of Utilities

Creation of Utilities: An important characteristic of business is the creation of utilities is goods so that consumers may use them.

For instance, when goods are transported from the places of production to the places of consumers who ultimately use them, then place utility is created. When raw material is converted into finished goods, it creats form utility. When it is stored and brought into the market when needed, then time utility is created.

IMPORTANT OF BUSINESS IN THE PRESENT DAY WORLD

IMPORTANT OF BUSINESS IN THE PRESENT DAY WORLD:
Importance of Business: In earnly time, the goods were produced for one's own self or for the use of family members at the most. As time passed on, the business was conducted by means of barter system in which goods of one kind were exchanged for other goods of equal value. When coins cam into use, business expanded both in rural and urban areas. With the increase of transport facilities, the important and export of goods developed between the nation. The industrial Revolution of the 18th century increased the scale of production, division of labour, specialization and standardizaion of goods. Over the years, the size of business has expanded. The ise of machines has increased. The working business is being computerized ar a very fast speed now. The important of business can be judged from the various activities connected with it.

               IMPORTANT OF BUSINESS

 Mass Production of Goods:
1) The business of today is making the best possible use of the scarce resources for production goods on a larger scale. The us of automatic machines, new materials, new processing methods etc have not only lowered the cost of production of goods but has helped the producers in producing goods in desired quality and quantity. 
Expansion of Market:
2) In the modern world, goods are produced by business according to the needs and expectations of the customers. The customers want goods and services of requisite quality, atreasonable price in at right time. The business of today tries to satisfy the costumers both within and outside the country by developing and designing the products according to the tastes and purchasing power of the costumers. Markets, therefore, have expanded consumption of goods due to increase in number of customers all over the world.

3) Innovations

Innovations:

The business of today is all the time busy in making improvements by introducing new products, for example, credit card, digital diary, mobile phone etc. It is also introducing new methods
of distribution, for example , e-commerce , teleshoping. It is also using new materials of production of goods such as transistors instead of vacuum tubes, CNC instead of petrol. All these innovations in production bring improvements in the quality of products and reduce costs.

4) Fast Means of Communication and Transport

Fast Means of Communication and Transport:

The fast developed means of communication and transport these days are helping the traders in providing goods to the costumers at the right time, right place and right price. These aids to trade have helped in the expansion of business.

5) Provision of Credit by Banks

Provision of Credit by Banks:

In the modern world, the commercial banks and other specialized credit institutions are providing credit to the agriculturists, traders and manufacturers for producing goods and doing bsinesson large scale

6) Insurance

Insurance:

The various types of business risks which may happen due to fire, theft, flood, earthquak, strikes etc. can be insured and the loss if any arising out of the risks can be recovered. Insurance has given stability to the business now which in the earlier days was not available.

7) Employment

Employment:

Business of today has generated employment both in the rural and urban areas on a bigger scale.

8) Source of Revenue

Source of Revenue:

Business of today is providing revenue to the state with which the government maintains law and order, undertakes defence and carries on welfare and development activities.

9) Urbanization

Urbanization:

As business is expanding, it is helping in urbanization. The growth of cities has changed the social life of man. His vision has been broadened. Education facilities have increased.

BUSINESS RISK & CAUSES OF BUSINESS RISK

What is Business Risk:

Business is mainly run to earn profit. However, there is always a chance of suffering loss in it. This danger of loss from unforeseenable events in future in business is name as business risk. Business risk is an essential element of business. it cannot be avoided but it can be minimized by taking timely suitable measures by the businessman. The main causes of business risk in brief are as under.

1) Natural Factor

Natural Factor:

There are certain natural factors like earthquake, floods, famine hailstorm etc. Which cause damage to business. Since human beings have no control over nature, therefore, the loss caused to business due to natural causes is unavoidable.

2) Change in Government Policy

Change in Government Policy:

If there is a sudden shift in monetary and "fiscal policies of the government, it may lead to loss business.

3) Use of Modern Techniques of Production

Use of Modern Techniques of Production:

If the manufactures set up heavy machinery and being to use modern techniques of production, which lower per unit cost of production of goods, the small business units producing similar goods will suffer losses as they will not be able to introduce heavy machinery.

PROBLEMS BEFORE ESTABLISHING A NEW BUSINESS

By establishing a business means to start a new bsiness. Before the industrial revolution, the goods were generally produced for local markets. If was, therefore, easy to establish and operate the business. The conditions are now entirely changed. The goods are produced by machines. The rate of production has gone up. There is stiff competition for the sale of goods in the market. Goods are produced in inticipation of demand. The risk in business has increased manifold. The entrepreneur, therefore, has to be very careful before undertaking any new business. The main factors are problems which are to be examined before establishing a new business are as follows.

1) Selection of Business

Selection of Business:

The most important decision before engaging one-self in any bsiness activity in the selection of business. Once a decision is taken in a business is established, it then becomes difficult to change it, So detail investigations and utmost care should be taken up in the selection of business.

2) Provision of Capital

 Provision of Capital:

Capital is life blood of business. Before starting a business, the capital needs of the business is to be assessed. The capital needs depend upon its fixed and working capital requirements. After considering the financial requirements, the sources for raising funds for the business should be taken up. In case the full amount of capital for establishing and operating business cannot be met from owned capital, (own resources then arrangements shall have to be made for raising of borrowed capital from banks, friends etc.

3) Location

 Location :

The selection of a suitable place for the establishment of a business is of utmost importance for the success of a business. The availability of raw material, trained labour, banking facilities, telephone, gas, cheap transport, nearness to market for finished products etc, are the important considerations in the selection of site for business.

4) Fulfillment of Legal Requirements

Fulfillment of Legal Requirements:

An entrepreneur before starting a business has to fulfill the conditions and rules enforced by the state, if any. The non fulfillment of legal requirement may send him to jail.

MAIN SOCIAL RESPONSIBILITIES OF BUSINESS TO SOCIETY

According to Henry Ford, the economic objective of business is no doubt to earn maximum profit but this philosophy is undergoing a change as the years pass. The business is now required to produce more and more quality goods for more and more people and at lower and lower prices. In addition to this the business has to shoulder the social responsibilities.

For human betterment the bussiness is to be organized in such a way that it also leads to human betterment. Thus self interset of earning profit and promotion of human will being should go together in business. The main obligations of business in brief are"

(A). Obligations to itself

 Obligations to itself:

                    (i) Planing the business with foresight and honesty.
                    (ii) Earning reasonable profit through lawful means.
                    (iii) Keeping steady expantion and growth of business.
                    (iv) Serving the society with vigour and zeal.

(B). To the share holders:

 To the share holders:

                    (i) Fair and judicious use of capital.
                    (ii) Payment of proper dividends.
                    (iii) Holding annual meetings with the share holders.