CSEC The Nature of Business

• Barter was the first means of exchanging goods and services at the dawn of business activity.
• What would be some advanatges of Barter?

  Facilitates trade without money and gets rid of surplus production
• What are two disadvantages of Barter

  Double councidence of wants and some goods are not divisible
• Describe the role of money.

  A subsitence economy was the earliest economy ever, when these early societes needed to look outwards to obtain items they didn't produce, the needed to trade. Once trade became normal there were complications involved in the process.

  Monetary systems were developed to combat these problems.
• A bill of exchange is an unconditional order from individual (drawer) to another (drawee) in agreement of making a payment earlier in the future.
• Electronic Transfer is any transfer of funds or payment made electronically. Advantages include a easy transaction process without detailed paperwork. However the systems may be suseptable to hacking or crashing, causing widescale frustration.
• Characteristics of money include scarcity, acceptability, portability, durability and divisibility.
• Functions of Money include a medium of exchange, unit of account, a store of value and a standard of deffered payment.
• Tele-banking refers to making banking transactions using a computer network while e-commerce refers to the trading of goods using online communications.
• A cheque is a printed form from the bank used by an individual who instructs their bank to pay another individual from their account.

  A certified cheque allows an individual to recieve cash on demand.

  A post-dated cheque is one which is dated for a payment in the future.
• Debit cards are machine readable plastic cards that can make purchases and withdraws straight from the users bank account.
• Credit cards are the same as debit cards except they use money from the bank itself instead of the user's account. The user is effectively borrowing money and receives a statement showing how much they owe.
• A bank draft is basically a cheque made by the bank on behalf of its customer to allow them to make a large purchase, example a house or car.
• Telegraphic Money Transfers are fast ways of transferring money from one account to another overseas.
• Bank transfers are very similar to telegraphic money transfers except they require less information for tranfers to take place.
• M-money refers to the use of mobile phones to make electronic transactions. Rather than paying cash, users can use apps to pay for goods and services.
• The private sector is the part of the economy that consists of small, medium and large businesses with the intention of making a profit.
• The public sector is the part of the economy that is operated and run by the government. These consist of public needs such as hospital, police, water and fire services.
• Soletraders own and control a business by themselves. Advantages are: easy to form, makes all decisions and profits.

  Disadvatages are: Bares all the loss, unlimited liability
• Limited liability is when the business has to pay back only what was invested into the business compared to unlimited liability where the business has to pay exactly what was lost. This often results in business owners having to sell their cars or houses.
• A partnership is a business between 2-20 persons, carrying on business in common with a view to profit. E.g Accounting firms, lawyer firms
• Funds are raised in a partnership from partner contributions and business loans.

  Advantages of partnerships are work load, skills and losses are shared. Disadvantages may include disputes and share of profits.
• A Deed of Partnership is a legal document associated with partnerships. 


  Contents include: capital to be contributed, whether od not partners can draw money from the business and information od each partner's salary.
• Subsitence economy is an old indigenous economy that relates to producing enough goods to live without making significant surplus.
• Command economy is one where the government has total or most control. All production, jobs and allocation of goods are controlled by the government. Eg. China
• Free market is an exact contrast to command economy.

  Private businesses in these economies dictate what product should be made and how it should be made. Eg. US
• A mixed economy is one where the economy is split between the private sector and the public sector. Mans needs are taken care of by the government/public sector.

  eg. public transport, healthcare systems

  Man's wants are taken care of by the private sector which includes small, medium and large businesses. Eg Trinidad and Tobago
• Functional areas of business are work that needs to be done by different sectors of a business. The five functional areas are: Production, Marketing, Finance, Human resource and Research and Development.
• Finance - This area deals with managing financial resources within a company. It involves budgeting, forecasting, accounting, auditing, taxation and risk management. Eg. Banks, insurance companies, investment firms, stockbrokers etc.
• Marketing - This area focuses on identifying customer needs and meeting those needs through marketing strategies such as advertising, sales promotions, personal selling and direct mail campaigns. Eg. Advertising agencies, retail stores, wholesale companies, banks etc.
• Human Resource Management (HRM) - This area focuses on hiring, training, developing and retaining employees. HRM also manages employee relations, compensation and benefits, performance appraisals and career development. Eg. HR consultants, recruitment agencies, employment bureaus, staffing services
• Production - This area focuses on creating goods or providing services. It involves planning production processes, purchasing raw materials, manufacturing products, quality control and distribution. Eg. Manufacturing plants, construction companies, service providers like hotels, restaurants, hospitals etc.
• Research & Development - This area focuses on innovation and new ideas. R&D aims at improving existing products and finding solutions to problems. It involves research into new technologies, testing prototypes, patenting inventions and commercializing innovations. Eg. Scientific laboratories, engineering firms, technology startups, pharmaceutical companies etc.
• A stakeholder is an individual or organisation that has an interest in the business and is affected by its activities.
• Internal stakeholders are the individuals directly involved in the business activities such as: employees, managers and owners.
• External stakholders are the individuals not involved with business activities but are still affected or have some affect on the business. E.g: Suppliers, shareholders, customers, society and government.
• The employer's role as a stakeholder in the business is to combine the factors of production to produce goods and services. It is their responsibility that their business is carrying out ethical and safe practices for the benefit of others.
• The employee's role as stakeholders is to put forth their full potential to the job they were assigned to in an orderly and ethical way in order to create efficient, reliable labour and hence, increase productivity.
• It is the role of customers/consumers as stakeholders are buying and reviewing products and services. These are the most important stakeholders of a business as their relations with the business can make or break the success of the organisation itself.
• Business 'ethics' regards with if the activities of the business are 'the right thing to do'. This concers itself with if the business is fair, honest and even legal.

  Illegal and unethical are different. All illegal activity is unethical but not every unethical activity is illegal.

  Illegal means against the law e.g tax evasion, operating without license or money laundering whilst unethical is 'not right' such as improper energy use or improper record keeping.