Course: Fundamentals of Business (9501) Semester: Spring, 2021
Level: BBA (4 Years) / PGD Total Marks: 100
Pass Marks: 50
Assignment No. 1
(Units: 1–5)
Q: 1 Discuss the influence the government has on the profit motive.
Ans:
What Is the Profit Motive?
The profit motive is the intent to achieve a monetary gain in a project, transaction, or material endeavor. Profit motive can also be construed as the underlying reason why a taxpayer or company participates in business activities of any kind.
Simply put, the profit motive suggests that people tend to take actions that will result in them making money (profiting). In economic thought, Adam Smith identified the profit motive in his book, The Wealth of Nations, as the human propensity to truck, barter, and trade.
Government can be efficient without a profit motive. ... Any organization; private companies, non-profits, and governments have limited resources. These resources include; money, manpower, and time. Government can and must be efficient, even without a profit motive.
For example, a business might be willing to absorb lower profits and even losses in the present to strengthen its position and increase its market share so that it can earn higher profits in the future.
Profit motive influence our economy
The profit motive refers to an individual's drive to undertake activities that will yield net economic gain. Because of the profit motive, people are induced to invent, innovate, and take risks that they may not otherwise pursue.
Why must businesses make a profit?
Why is Profit Important? In most businesses profit is the reward that the owners of the business want to achieve from taking risks and making investments. ... Profit, like the positive cash flows that it helps create, can be seen as the lifeblood of a successful and valuable business.
The correct answer would be, the desire to make money through goods and services. Explanation: ... Companies earn money through their goods and services. This is the profit motive of the company.
In a similar vein, Factors of production include Land and other natural resources, Labor, Factory, Building, Machinery, Tools, Raw Materials and Enterprise
Is profit motive good or bad?
So, yes having a profit motive is good in business. However, if the profit motive is the only motive of the business in all likelihood it will also eventually fail - it will generally just take longer to happen. So a profit motive is just one motive that a business must have.
Government have a profit motive
Government can be efficient without a profit motive. ... Any organization; private companies, non-profits, and governments have limited resources. These resources include; money, manpower, and time. Government can and must be efficient, even without a profit motive.
What is the difference between open opportunity and legal equality?
What best explains the profit motive?
The correct answer would be, The desire to make money through goods and services. Explanation: ... Companies earn money through their goods and services. This is the profit motive of the company.28-Apr-2019
Six Factors Affecting Profit
Number of Production Units. The most basic factor affecting profit in any business is the number of production units. ...
Production per Unit. The productivity of your land and livestock also has an impact on profit. ...
Direct Costs. ...
Value per Unit. ...
Enterprise Mix. ...
Overhead Costs.
How the Profit Motive Works
In theory, the profit motive helps everyone from individuals to corporations decide what to do at a particular time. Looking at profit, or the potential for profit, simplifies many decisions. If a company makes five different products and earns most of its profit from just two, then the profit motive view would suggest that the company dump the unprofitable lines and invest more in the profitable production lines.
Similarly, a person would want to focus on the activities or employment opportunities that offer the most return for their efforts. For some people, this will mean the highest paying job. For others, it may mean creating their own enterprise with hopes of a higher income in the future.
The profitability of a particular activity is, in theory, communicated by market signals that ultimately are a function of supply and demand. The higher the demand (or potential demand), the higher the profitability (or potential profitability). When the profitability is high, more people and businesses will seek out that activity.
Q 2: Briefly describe a firm’s social responsibility to its community and the environment. (20)
Social Responsibility to the Community and the Environment
Ans: What is social responsibility to the community?
Social responsibility is an ethical theory in which individuals are accountable for fulfilling their civic duty, and the actions of an individual must benefit the whole of society. In this way, there must be a balance between economic growth and the welfare of society and the environment.
What is social responsibility towards environment?
Corporate Social Responsibility (CSR) towards the natural environment is a concept of conducting business activities—according to which the companies, in strict compliance with law, and while still making profits—voluntarily take into consideration the impacts of their operations on the environment in their business
Community responsibilities area unit a personality's duties or obligations to the community and embody cooperation, respect and participation. The thought goes on the far side thinking and acting as people to common beliefs concerning shared interests and life. A basic community responsibility is voting in elections.
More than a destination at
the end of the day, a community is a place people feel at home and a place
where people want to feel safe at. Community responsibilities area unit a
personality's duties or obligations to the community and embody cooperation,
respect and participation. The thought goes on the far side thinking and acting
as people to common beliefs concerning shared interests and life. A basic
community responsibility is voting in elections. Being socially accountable
means folks and organizations should behave ethically and with sensitivity
toward social, cultural, economic and environmental problems. Striving for social
responsibility helps people, organizations and governments have a positive
impact on development, business…show more content…
Under community we tend to perceive the village, the tiny city or the
residential complicated within the massive town, where lives every one of us.
Every community lives its own life that undergoes a method of development all
the time. And each one might participate in this development in numerous ways ,
for example by taking part in cleaning of the street on which someone lives, by
collaborating in organization of an occurrence, connected with the history of
the city or the village or by rendering social services to youngsters without
parents or elderly people. The individual social responsibility additionally
might be expressed in creating donations for important for the society causes –
social, cultural or ecological. There are some ways of donating, as an example
donating of products or donating cash through a checking account or online.
The Social responsibilities of Community responsibilities area unit a personality's duties or obligations to the community and embody cooperation, respect and participation. The thought goes on the far side thinking and acting as people to common beliefs concerning shared interests and life. A basic community responsibility is voting in elections. Operate companies are known as Corporate Social Responsibility. It is a duty of the corporate body to protect the interest of the society as well as the environment. We know the main motive of business is to earn the money, corporations should take initiative for the welfare of the society and should perform their activities within the framework of environmental norms.
According to Lord Holmes and Richard Watts “Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.”
Corporate companies are part of society and their business activities affect directly or indirectly to the society. So the companies should provide goods and services legally, efficiently and profitably to the society. It is also the newest management strategies where companies try to create a positive impact on society while doing business.
Most of the consumers expect from companies to not only make a profit but also operate responsibly to address social and environmental issues according to a study of Cone Communications.
Why CSR Matters? For a balance of economic, environmental and social imperatives, CSR matters. It is a type of management concept whereby companies integrate social and environmental concerns in their business as well addressing the expectations of shareholders and stakeholders. Environmental sustainability impacted by corporate actions so companies have to environmental sustainability with recycling, waste management, renewable energy or reducing paper use act. Raising money for local charities, sponsoring local events and supporting local economy can provide a better life to the community people.
Efforts of Corporate for Social Responsibility
Companies have a large carbon footprint and they are reducing those footprints with the use of new technology or other innovations. It would consider both good for the company and society. So the protection of the environment is the primary focus of the corporate companies.
Corporates also practice social responsibility by donating to national and local charities which can be beneficial to the society. They have lots of resources that can benefit the local community. Attending volunteer events says a lot about a company’s sincerity and social responsibility. By doing good deeds without expecting anything in return, companies are able to express any concern for their issues and support for certain organizations.
Q. 3:Discuss the two primary responsibilities of the federal government in establishing economic policies. What does it mean to have a budget deficit? (20)
Ans: The U.S. government's role in the economy can be broken down into two basic sets of functions: it attempts to promote economic stability and growth, and it attempts to regulate and control the economy. ... The federal government regulates and controls the economy through numerous laws affecting economic activity.
What is government's primary role in the economy?
Economists, however, identify six major functions of governments in market economies. Governments provide the legal and social framework, maintain competition, provide public goods and services, redistribute income, correct for externalities, and stabilize the economy.
Monetary and fiscal policy are used to regulate the economy, economic growth, and inflation so that long-run growth is possible. Government activities used to improve long-run growth include stimulating economic growth, enacting monetary policies, fixing the exchange rates, and using wage and price controls.
What are the 4 roles of government in the economy?
The government (1) provides the legal and social framework within which the economy operates, (2) maintains competition in the marketplace, (3) provides public goods and services, (4) redistributes income, (5) corn- rests for externalities, and (6) takes certain actions to stabilize the economy.
Governments supervise the resolution of conflicting interests, the workings of the political process, the enforcement of laws and rights, and the monitoring of national income and international trade; they regulate economic and social relationships among individuals and private organizations; and they carry out.
The differences in rates of growth are often attributed to two factors: government and entrepreneurship. The two are not mutually exclusive. In the early stages of sustained growth, government has often provided the incentives for entrepreneurship to take hold. In some economies the development of transportation, power, and other utilities has been carried out by the government. In others the government has offered financial inducements and subsidies. The land given U.S. railroad developers in the second half of the 19th century is a notable example of the latter. Another important role governments have played in the early stages is to help establish the sort of capital and money markets in which lenders could have confidence. Without financial intermediaries acting as brokers between lenders and business borrowers, it is difficult to envisage economic growth taking place on a sustained and rapid basis.
In the 19th century most liberal thinkers held that the main role for government in a developed capitalist system was that of a policeman: to preserve law and order, uphold the sanctity of private property, and give business as much freedom as possible. The Great Depression of the 1930s persuaded many that a laissez-faire system did not automatically provide the necessary incentives to the innovation and risk bearing essential for economic growth. This led to a good deal of writing on the role that governments might play in stimulating growth. Economists have argued that, at the very least, governments can undertake to prevent serious and prolonged recessions. Only in this way can a general business psychology be developed that assumes growth to be the natural course of things, so that investment programs will pay off.
Growth theorists since World War II have gone further, arguing that it is not enough simply to achieve full employment periodically.
Some maintain that it is necessary to maintain full employment over an extended period of time if high growth is to result. This argument relates to the earlier point that two economies may experience the same rate of growth of capital but that overall growth and technical progress will proceed at a much more rapid rate in one than in the other because of differences in the quality of new capital goods produced.
The term enterprise investment has been used to describe the kind of capital formation that involves innovations and that by building ahead of demand generates rapid rates of growth of productivity or technical progress. But to get such growth, it has been argued, an economy must be run “flat out,” at full speed. While this has been subject to some dispute, there is a fairly general consensus that growth will be faster when unemployment fluctuates within a narrow range and at low levels.
What do you mean by deficit budget?
A budget deficit occurs when expenses exceed revenue and indicate the financial health of a country. The government generally uses the term budget deficit when referring to spending rather than businesses or individuals. Accrued deficits form national debt.
To libertarian and free-market economists, budget deficits are liable to cause significant economic problems – crowding out of the private sector, higher interest rates, future tax rises and even potential of inflation. ... The most useful way of measuring the size of the budget deficit is as a % of GDP.
A budget deficit occurs when a government spends more in a given year than it collects in revenues, such as taxes. As a simple example, if a government takes in $10 billion in revenue in a particular year, and its expenditures for the same year are $12 billion, it is running a deficit of $2 billion.
When an increase in government expenditure or a decrease in government revenue increases the budget deficit, the Treasury must issue more bonds. This reduces the price of bonds, raising the interest rate. ... A higher exchange rate reduces net exports.
Budget deficit is likely to stimulate aggregate demand and cause inflation. ... Budget deficit will increase real interest rates and, thereby, retard private spending.
A budget deficit occurs when expenses exceed revenue and indicate the financial health of a country. The government generally uses the term budget deficit when referring to spending rather than businesses or individuals. Accrued deficits form national debt.
The two main causes of a budget deficit are excessive government spending and low levels of taxation that don't cover expenditure. Tax cuts can cause declines in revenue can result in a budget deficit, or, a massive fiscal stimulus can increase government spending over and above the income it receives
Q. 4 Identify and explain the various types of international alliances between Pakistani firms and foreign firms. (20)
. The Islamic Republic of Pakistan maintains a large diplomatic network across the world. Pakistan is the second largest Muslim-majority country in terms of population (after Indonesia and is the only Muslim majority nation to have possession of nuclear weapons.
Pakistan's economy is integrated into the world with strong trade ties to the EU and economic alliances and agreements with many Asian nations.[citation needed]
Pakistan enjoys a highly strategic geopolitical location, being situated at the corridor of major maritime and land-based transit routes reaching from energy-rich Central Asia and the Middle East to the population centers of South and East Asia, as well as having geostrategic hotspots such as Afghanistan, China, India and Iran as immediate neighbors. Pakistan maintains a tens relationship with the Republic of India due to the Kashmir conflict, close ties with the People's Republic of China, Turkey, Russia and Gulf Arab states and a fluctuating relationship with the United States of America due to overlapping interests during the Cold War and War on Terror.
Foreign policy of Pakistan
Main articles: China–Pakistan relations, Pakistan–Soviet Union relations, Pakistan–United States relations, and Pakistan-European Union relations
Pakistan's Foreign Policy seeks to protect, promote and advance Pakistan's national interests in the comity of nations”
M A Jinnah's Vision On 15 August 1947, outlining the foreign policy of Pakistan, Quaid-e-AZ am observed:
"Our objective should be peace within and peace without. We want to live peacefully and maintain cordial and friendly relations with our immediate neighbors and with world at large. We have no aggressive designs against any one. We stand by the United Nations Charter and will gladly make our contribution to the peace and prosperity of the world."
Interaction with the neighboring countries such as Afghanistan (in the West) and Inda (in East. During most of 1947–1991, the USSR support was given to Republic of India, over which it has fought three wars on Kashmir conflict. During the 1960s, Pakistan's relations with and neighboring Afghanistan have also been extremely difficult due to the latter's contest over the Durand Line [citation needed. The foreign relations with Iran, Saudi Arabia and China remain extremely important and based on the extensive cooperation in national security and economic interests in the Persian Gulf and wide-ranging bilateral relations with the United States and other Western countries. With the growing influence of USSR in the region, Pakistan cemented close security relations with China in Asia and Poland in Europe during most of the Cold War. While Pakistan had "on-off relations" with the United States, Pakistan assisted President Nixon reproach with China and other East Asian countries.
In 1947, Muhammad Ali Jinnah, founder of the state of Pakistan, clearly described the principles and objectives of Pakistan's foreign policy in a broadcast message, which is featured prominently in a quotation on the homepage of Pakistan's Ministry of Foreign Affairs website: "The foundation of our foreign policy is friendship with all nations across the globe."
Pakistan-China relations
Main article: China-Pakistan relations
China has played a significant role in the development, economy and security of Pakistan, with relationship beginning in 1950 when Pakistan was among the first countries to enter into official diplomatic relations with the Republic of China (on Taiwan and recognize the People's Republic of China (PRC) regime on mainland China. Since then, both countries have placed considerable importance on the maintenance of an extremely close and supportive special relationship and the two countries have regularly exchanged high-level visits resulting in a variety of agreements. The PRC has provided economic, military, and technical assistance to Pakistan, and each country considers the other a close strategic ally. Since the advent of the 21st century, Pakistan and China have strengthened their relations through bilateral trade, military agreements and supporting each other on key issues.
Pakistan–United States relations
Main article: Pakistan–United States relations
The United States has played an important role in the young history of Pakistan, being one of the first countries to recognize their independence on 14 August 1947.The relationship between the two countries went through varying levels of friendliness, but Pakistan consistently found themselves on the United States side of issues faced during the Cold War. Pakistan served as a geostrategic position for United States military bases during the Cold War since it bordered the Soviet Union and China. These positive relations would fall apart following successful cooperation in fighting the Soviet Union's influence in Central Asia and the subsequent fall of the Soviet Union.
In reaction to Pakistan's new nuclear capacity, the United States in 1992 passed the approving sanctions against Pakistan, Relations would strengthen following with Pakistan's warm response following the tragedy. Aid was given to Pakistan for the first time again in 2002, and the 2000s saw an extension of this friendly relationship.
As the War on Terror continued to linger, the United States and Pakistan would disagree on strategies while also accusing each other of various things. This dynamic would reach a head following a few incidents highlighted by the operation to kill Osama bin Laden۔ While these incidents wore down the trust between the two nations, the two would continue to share a healthy relationship. Although the two countries do not view each other favorably in polls, the two governments share an important relationship featuring multiple types of aid to Pakistan, important military cooperation and collaboration, and a strategic ally in Central Asia for the United States The United States and Pakistan's relationship persists of promoting trade and regional economic cooperation, this type of relationship is beneficial for both countries and gives incentive for continuing friendly relations. U.S. also has concerns regarding Pakistan include regional and global terrorism; Afghan stability; democratization and human rights protection; the ongoing Kashmir problem and Pakistan-India tensions; and economic development. Recently US stopped military aid to Pakistan, which was about US$2 billion per year.
Muslim world
After Independence, Pakistan vigorously pursued bilateral relations with other Muslim countries and made a wholehearted bid for leadership of the Muslim world, or at least for leadership in achieving its unity. The Ali brothers had sought to project Pakistan as the natural leader of the Islamic world, in large part due to its large manpower and military strength. A top-ranking Muslim League leader, Khaliq zaman, declared that Pakistan would bring together all Muslim countries into Islamite– a pan-Islamic entity. Such developments (alongside Pakistan's creation) did not get American approval and British Prime Minister Clement Attlee voiced international opinion at the time by stating that he wished that India and Pakistan would re-unite. Since most of the Arab world was undergoing a nationalist awakening at the time, there was little attraction to Pakistan's Pan-Islamic aspirations. Some of the Arab countries saw the 'Islamite' project as a Pakistani attempt to dominate other Muslim states.
Pakistan vigorously championed the right of self-determination for Muslims around the world. Pakistan's efforts for the independence movements of Indonesia, Algeria, Tunisia, Morocco and Eritrea were significant and initially led to close ties between these countries and Pakistan. However, Pakistan also masterminded an attack on the Afghan city of Jalalabad during the Afghan Civil War to establish an Islamic government there. Pakistan had wished to foment an 'Islamic Revolution' which would transcend national borders covering Pakistan, Afghanistan and Central Asia.
On the other hand, Pakistan's relations with Iran have been strained at times due to sectarian tensions. Iran and Saudi Arabia used Pakistan as a battleground for their proxy sectarian war and by the 1990s, Pakistan's support for the Sunni Taliban organization in Afghanistan became a problem for Shia Iran which opposed a Taliban-controlled Afghanistan. Tensions between Iran and Pakistan intensified in 1998, when Iran accused Pakistan of war crimes as Pakistani warplanes bombarded Afghanistan's last Shia stronghold in support of the Taliban
Q: 5 what are the disadvantages of unlimited liability in a sole proprietorship. What happens to the personal wealth of the owner if he or she is sued? Would this discourage you from starting up a sole proprietorship?
Ans:
Merits or Advantages of Sole Proprietorship:
1. Easy Formation and Dissolution:
There are no legal formalities to start a sole proprietary business. Therefore, it become easy to start. There may be a negligible or few restrictions imposed by local bodies such as municipal corporation etc. for health, sanitation and environment point of view, that must be followed by him. It is equally easy to dissolve the sole proprietary business. There are no legal formalities for dissolution too. An individual can easily start the business under this form and can easily dissolve the same.
2. Self or Direct Motivation:
In this form of business organization, there is a direct relationship between the efforts and profits. Sole proprietor himself enjoys the entire profit, therefore, he is self-motivated, inspired or induced to put in his best and maximum efforts, talents, knowledge and skills in running the business successfully.
3. Absolute or Total Control:
The sole proprietor prepares plans, policies and executes the same and manages the affairs of the business organization. No one has right to interfere in his business affairs. He is free to direct and control the business operations.
4. Sole and Quick Decisions:
All the decisions regarding business organizations are taken by the sole proprietor. He does not have to depend on others for decisions. Therefore, the decisions are taken in proprietorship is sole and quicker. The implementation of such decisions is also done quickly without delay. Reason behind this is, that he only is the decision maker and executor.
5. Minimum Government Regulation:
The sole proprietorship is free from legal intervention and formalities. This type of business form is least regulated by law and the government. There is no intervention by the government in day to day functioning of the business. There is no government regulation in respect of formation and dissolution of the business. But the Tax Laws and Labor Laws are required to be observed.
6. Business Secrecy:
In a competitive world business secrecies must be highly maintained. In this form of business organizations all the business secrets are highly retained as non-else share them.
7. Direct and Personal Relation or Contact with Customers and its Employees:
In sole proprietorship the capital investment is small therefore, size of the business is also small and limited. That is why he is able to keep direct and personal relationship with his customers and employees. He is able to give personal attention and care towards customers and employees, and therefore, it is possible to give best services to both of them which in turn increases his profit.
8. Flexible Operations:
There is ample scope for flexibility in business operations. A sole proprietor can easily adjust himself and his business operations according to changes occurring within and outside the business organization.
9. Credit Standing in Market:
A sole proprietor can enhance his name and fame in the market by managing business operations profitably. If he is honest and prompt enough to pay the debts of his business he can earn good reputation in the nearby markets and therefore, the bankers, creditors generally do not hesitate in giving credit facilities to him.
10. Diffusion of Economic Concentration:
In sole proprietorship business organization there is far and wide ownership, which ultimately helps in diffusion of concentration of economic power in the hands of few people. A large number of people in society carry on their businesses under sole proprietorship.
11. Opportunity to Develop Personality and Earn Respect:
Under this form of business, the sole proprietor has to invest, manage, control, and has to take decision himself. Therefore, the qualities like leadership, decision, and making, problem solving ability, initiative, self-reliance, and ability to face all challenges are automatically developed in him. All round personality can thus, be developed by him. Because of his business profits and prosperity, he can enjoy a respectful life in the society and can get love and affection from the, citizens.
1. Limited Capital or Financial Resources:
The capital raised by the sole proprietor is by himself and through credit still the amount of capital is limited. Because of unlimited liabilities, he is not interested to invest more money in business. Therefore, the size of the business is small or limited.
2. Unlimited Liability:
All the losses and risks in business are solely borne by sole proprietor. If the risks, losses, or debts could not be met out of the business assets and resources, his personal property also is attached and sold to satisfy the debts and claims of the creditors.
3. Limited Managerial Ability, Skill and Knowledge:
Today’s Business requires managerial ability, skill and knowledge in various areas like production, financing, marketing, purchasing material, person or human resources etc. It is very difficult to acquire all the qualities, for a sole person. Therefore, there is always lack of specialized skill, knowledge, ability, which in turn adversely affect the profit.
4. Uncertain Duration:
There is no separate entity of the firm from the sole proprietor so it is highly uncertain. If he becomes insolvent or physically handicapped (disability, insanity) or dies the business comes to an end.
5. Restricted Growth:
Because of limited financial resources and limited managerial ability, skill, and talent the development and growth of the business is also limited.
To sum up, the sole proprietorship can survive only when the business is small and simple the market is local and the demand for capital and skill is modest.
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