Characteristics of Business

Characteristics of Business

Some important characteristics of business have been explained below. These characteristics include profit, risk, separate entity, ownership, Growth etc.

1.   Profit Earning Activity

First characteristic of business is profit earning. Any commercial activity is performed with aim to earn profit is known as business. Thus activities performed for social welfare are not considered business. profit maximization is regarded as one of the main objective of the business.

2.   Risk & Uncertainty

Second important characteristic of business is risk & uncertainty. Every business carries some risks. It means profit in a business is not guaranteed and business may also suffer losses. Risk factor varies business to business. Some businesses carry high risk, while others carry low risk. These is famous rule for business risk i.e. High risk high profit and low risks low profit.

3.   Separate Entity

Another important characteristic of business is its separate entity. It means that affairs of business should be dealt separately and independently, and its affairs must not be mix with personal affairs, otherwise it would not be possible to calculate the actual performance (profit) and financial position of the business.

4.   Ownership

Another key characteristic of business is its ownership. The business must have some owner, who will share the profit and loss of the business. There are different types of ownership structures i.e. sole proprietorship, partnership, companies etc. These structures have been explained in my other article.

5.   Productivity & Efficiency

Maximum Productivity & efficiency to earn maximum profit is another important characteristic of business. Every businessman wants efficient utilization of resources to earn the maximum profit. Thus wastage of resources is strictly monitored in the business and all possible measures are taken to stop such wastage.

6.   Growth & Continuity

Another important characteristic of business is its growth & continuity. Every businessman enters into a business with long term objectives. Growth is important factor and business without growth prospect cannot exit for a long time. Management plans for steady growth of business.

7.   Types of business

There are different types of business which includes

a)    Trading – Buying and selling of goods.

b)   Manufacturing- producing and selling of goods.

c)    Provision of different services.

List of important Characteristics of Business

List of some important characteristics of business are given below

1.    Business is a profit generating activity.

2.    Business profits are subject to risk. (Profit are not guaranteed)

3.    Business must be dealt as separate entity.

4.    Business must have some ownership for sharing of risk & rewards.

5.    High productivity & efficiency is a key for successful business.