A business can be defined as the organized effort of individuals to produce and sell, for a profit, the products that satisfy individuals’ needs and wants. Goods are items that can be seen or touched. Service are things done for you by others. Product is a good or service that can be bought or sold.
Business also fulfills a number of other important functions;
Profit Is what remains after all business expenses have been deducted from sales revenue. It can be regarded as the return, or reward.
Income Employees provide their labour and in return receive either a;
Wage, money received by workers, usually on a weekly basis, for services they provide to an employer
Salary, a fixed amount of money paid on a regular basis, usually fortnightly or monthly, to a permanent employee of a business
A business receives money from the sale of its products. This is called revenue. From this revenue, all the expenses incurred in operating the business must be deducted. The amount that remains is the business’s profits. This becomes the business owner’s property and consequently their income.
If the business is a private or public company, it will have many owners referred to as shareholders. Usually some or all of a company’s profit is divided among shareholders. This type of income is called a dividend.
Employment The number of employees hired by a business at any time will largely depend on the nature of the products and the number of customers who wish to purchase the products. Generally, the more that is sold the more employees a business will hire.
Choice Is the act of selecting among alternatives. Freedom of choice exists when consumers can ‘shop around’ and select from a range of competitors’ products. The more competition there is, the greater the choice available to consumers. It is businesses, all competing with one another, that are responsible for the wide range of products in the shops. Entrepreneurship and risk An entrepreneur is someone who starts, operates and assumes the risk of a business venture in the hope of making a profit.
Everyone else (employees, suppliers, and lenders) must be paid before the owners. And if there is no profit, there can be no income to owners. A second risk is that if the business fails, its owner may lose all or part of the money he or she has put into it.