Meaning of business studies

The term business is derived from the word ‘busy’ which literally implies a state of being involved in some activity.Study means to make a close examination of a particular subject or thing with a view to learning or gaining knowledge.Business studies is therefore a subject that deals with activities taking place in production, distribution, buying, selling and consumption of goods and services.

MEANING OF BUSINESS STUDIES

The term business is derived from the word ‘busy’ which literally implies a state of being involved in some activity.Study means to make a close examination of a particular subject or thing with a view to learning or gaining knowledge.Business studies is therefore a subject that deals with the study of all those levels in production, distribution, buying and selling of goods and services.Business studies is always changing to reflect our daily lives as a society, hence it is a living subject.

Meaning of business environmentBusiness environment are circumstances or factors that influence business operations.These factors could either be within the control of business and are referred to as internal business environment or are beyond the control of the business and are referred to as external business environment.Instructions

 

Internal environment

Internal environment refers to the factors within the control of the business.Human resources ; They are important in an organization in that they take an active part in production. Workers/employees with the relevant skills promote the success of the business.

Financial resources;

 

The availability of finances enables a business to acquire relevant facilities required to achieve its objectives.

 

 

Management styles;this is the formal arrangement of day to day activities and relationships of people in such a way that work is directed towards the achievements of set objectives. A business that is managed well will be successful.

Goals and objectives;These are targets set by the managers of a business to be achieved. A business unit will only succeed if it has clear objectives which it strives to achieve.

Physical resources ;

These are tangible facilities such as buildings, machinery, motor vehicle etc which belongs to the business. When these facilities are made available and are organized properly they contribute to the success of the business

 

Meaning of managementIt is the process of arranging available resources efficiently in order to achieve stated objectives of the business.

Exercise

 

 

From the following statements indicate with a tick whether the statement is an advantage of an open layout (OL) or partitioned layout (PL) offices.

 

 

Advantages of office layouts PL OL

1. Easy supervision of workers2. Construction cost is low because partitions are few3. Privacy and confidentiality is enhanced4. Easy location of workers5. There are minimal disruptions from noise and movement within the office6. Creates a conclusive working environment for the employees7. It is cheap to decorate8. Enhances security of files and other equipment9. Floor space is enhanced10. There is less noise11. They are often perceived as a mark for prestige and importance12. It makes more economical use of lighting.

 

Solutions1. OL 7. OL2. OL 8.PL3. PL 9.OL4. OL 1OPL

5. PL 11. PL6. PL 12.OL

 

 

 

 

Exercise

From the following statements indicate with a tick whether the statement is an advantage of an open layout (OL) or partitioned layout (PL) offices.

 

 

Advantages of office layouts PL OL

Easy supervision of workers

Construction cost is low because partitions are few

Privacy and confidentiality is enhanced

Easy location of workers

There are minimal disruptions from noise and movement within the office

Creates a conclusive working environment for the employees

It is cheap to decorate

Enhances security of files and other equipment

Floor space is enhanced

There is less noise

They are often perceived as a mark for prestige and importance

It makes more economical use of lighting.

 

 

Solutions1. OL 7. OL2. OL 8.PL3. PL 9.OL4. OL 1OPL5. PL 11. PL6. PL 12.OL

 

 

 

 

Click the type of production that corresponds to the following activities  1)cooking for the family:

1. direct2. indirect

2cultivating a kitchen  garden    a)direct     b)indirect3)operating a kiosk  a) Direct   b)indirect4)house helper washing clothes    a)direct    B)indirect

Welcome to Business Studies Form One.

What is business? What is studies?

What is business studies then?

Businesses are very important to a country .They are the main vehicle by which countries grow.

Businesses are found in production, distribution and consumption of good and services.One can start a business in virtually all aspects of life Examples are;.

 

 

Introduction to business studies ObjectivesBy the end of the lesson you should be able to;(a) explain the meaning of business studies.(b) explain the importance of business studies in the society.

 

 

 

 

 

 

 

 

 

Introduction to business studies

By the end of the topic, you should be able to:(a) explain the meaning of business studies.(b) explain the importance of business studies in the society.

Why learn Business studies?

Business Studies will give you real life knowledge that will be usefull through out your life time.

Business studies will give you knowledge,skills and attitudes that will help you to be self reliant and understand bussiness activities around you.Learn it and start your journey of success.

Types of business activities.A business activity involves provision of goods or services in order to earn a profit.

Business activities can be undertaken in virtually all aspects of life.Examples are;

-Agriculture e.g. growing tomatoes for sale.

-Trade e.g. operating a retail shop.

-Constructing e.g. road construction.

Other business activities can be found in processing, mining ,fishing, manufacturing and provision of services.

 

 

EXERCISE;8

MEANING OF BUSINESS STUDIES

The term business is derived from the word "busy" which literally implies a state of being involved in some activity.Study means to make a close examination of a particular subject or thing with a view to learning or gaining knowledge.Business studies is therefore a subject that deals with activities taking place in production, distribution, buying, selling and consumption of goods and services.

Meaning of business studies

The term business is derived from the word 'busy' which literally implies a state of being involved in some activity.Study means to make a close examination of a particular subject or thing with a view to learning or gaining knowledge.Business studies is therefore a subject that deals with activities taking place in production, distribution, buying, selling and consumption of goods and services.

 

 

 

 

 

 

 

 

 

Meaning of business studies

The term business is derived from the word "busy "which literally implies a state of being in some activity.

Study means to make a close examination of a particular subject with a view of learning or gaining knowledge.

Business studies is therefore a subject that deals with the activities in production,distribution, buying , selling and consumption of goods and services.

Importance of Business studies in our society

The knowledge gained enables one to be self reliant or become self employed

It enables people to start and operate business profitably.

It enables business people to make wise business decisions.

It enables people to keep records of the business activities

It is a vital source of information about trade.

 

 

 

 

Purpose of a business

To make profits To provide goods and services

To maximise wealth To create employment

Business Activities

Business activities involve provision of goods and services inorder to make profit.Business activities can be undertaken in the following areas:

Agriculture: e.g growing tomotoes for sale

Trade : e.g operating a retail shop

Constraction : e.g constuction of a road

Other business activities can be found in processing,fishing,mining,manufacturing and provision of services.

 

 

 

 

Importance of Business studies in society

The knowledge gained enables one to be self reliant or become self employed.

It enables people to start and operate business profitably.

It enables business people to make wise business decisions.

It enables people to keep records of the business activities

It helps the learner the role of government in business.

 

 

 

Importance of Business Studies in society

1. The knowledge learned equips one to be self reliant as he/she takes up self employment opportunities available in the society.

2. It enables people to start and operate business profitably.3. It enables business people to make wise business decisions.4. It enables people to keep records of the business activities5. It is a vital source of information about trade.6. It enables learners to form a foundation for further studies.7. It enables one to understand and apppreciate basic economic issuesin the country and

world at large like inflation and reccession.

BUSINESS AND ITS ENVIRONMENT

Objectives

By the end of the topic you should be able to:

a) explain the meaning and purpose of a business

b) identify the various business activities

c) identify various types of business environment

d) explain how the various business environments influence a business.

Business And It's Environment

By the end of the topic you should be able to:

a) explain the meaning and purpose of a business.

b) identify the various business activities.

c) identify various types of business environments.

d) explain how the various business environments influence a business.

Business Environment

Meaning of environment

 

Meaning of a business

A business refers to any activity that is undertaken with an aim of making a profit.

Meaning of Environment

Environment refers to the surrounding or circumstances that influence something. Meaning of business environmentBusiness environment are circumstances or factors surrounding a business which can influence

its operations.Business environment can either be internal or external.

Click sub-headings on the menu bar (above) to see examples of business environment.

 

External EnvironmentExternal environment refers to those factors beyond the control of the businessEconomic environmentEconomic environment refers to a situation that influences consumers'willingness and ability to buy goods and services for example salaries and prices of goods and services. Favourable economic environment will promote the success of business.Population/demographicPopulation refers to the number of people in a given area. An increase in population will lead to an increase in demand for goods and services hence success of the business.Cultural values.These are the practice that regulates behavior of a society for example customs and beliefs. Culture dictates how people live and the products they consume. Business units should assess peoples' culture for them to serve them appropriately.

Competition

 

 

 

 

 

 

This is where firms are trying to outdo each other in their business activities for example in selling their products. A business that will not be able to compete effectively will not succeed.

Government policyThis refers to rules and regulations that affect the business for example taxes and licenses. Favourable government policies will promote the success of a business.

Technology Technology refers to the application of scientific knowledge in the process of production of goods and in the provision of services. Use of modern technology will facilitate success of the business.

Physical environment

Thisincludes infrastructure(roads,communication,power,and water,climate,relief(mountains,valleys) etc.Favourable physical environment will enhance business expansion

 

 

 

 

 

 

 

 

external business environment.InstructionsInsert a drawing of a business enterprise in rectangular form.The edges should be fenced and have an entry gate more information on the script Check script;Explanations;

 

Satisfaction of human wants By the end of the topic, you should be able to:(a) explain the meaning and characteristics of human wants(b) classify human wants(c) explain the meaning of goods and services

(d)discuss characteristics of goods and services (e) explain the meaning and characteristics of economic resources(f) relate the concept of scarcity, choice and opportunity cost to real life situations

 

 

SATISFACTION OF HUMAN WANTS ObjectivesBy the end of this topic you should be able to;(a) explain the meaning and characteristics of human wants(b) classify human wants.(c) explain the meaning of goods and service

(d)discuss the characteristics of goods and services.(e) explain the meaning and characteristics of economic resources(f ) relate the concept of scarcity, choice and opportunity cost to real life situation

 

 

Human wants  for survival   for comfortFoodRadioShelterEducationClothingNewspaperMedical careA car

 

 

Meaning of goods and services Human wants are satisfied by goods and services

Goods are physical commodities that one can see or touch e.g furniture or food.

Services are intangible activities that one cannot see but satisfies human wants e.g teaching, banking.

Meaning of human wantsHuman wants are needs,requirements and desires that people have.

Human beings have many wants .Examples of these desires are food, shelter, clothing. entertainment, education and medical care among many others.

 

 

Types of human wantsBasic wantsThese are necessities that are absolutely vital for human survival. That is, without them human beings will die. For example food, shelter and clothing. Basic wants are also referred to as primary wants.Secondary wantsThese are requirements which one can do without but their fulfillment can make life more comfortable. For example a car, radio and a newspaper etc

Meaning of goods and services Human wants are satisfied by goods and services.

Goods are physical commodities that one can see or touch e.g furniture or food.

Services are intangible activities that one cannot see but satisfies human wants e.g teaching, banking, preaching etc.

CHARACTERISTICS OF GOODS

-They are tangible

-They can be stored

-They can be standardized.

-They can be seperated from the producer

CHARACTERISTICS OF SERVICES

-They are intangible

-They cannot be stored

-They cannot be standardized

-They are inseperable from the producer

SCARCITY CHOICE AND OPORTUNITY COST

Human wants are unlimited while resouces required to satisfy them are limited (scarce).Therefore man has to make a choice of what want to satisfy first with available resorces. The order in which wants are to be satisfied is known as the scale of preferences.

To satisfy wants, some wants have to be sacrificed or foregone. The alternative wants or the benefits foregone is called opportunity cost.

Example:

Mary had sh 25 with which to buy either a pen or a loaf of bread.If she buys a pen,the loaf of bread will be foregone .The loaf of bread is the opportunity cost.

 

 

 

 

 

Characteristics of human wants

The following are the main characteristics of human wants

(a)Human wants are unlimited:This means that there are too many wants to be satisfied by our limited resources

 

 

(b)They are competitive:Due to limited resources the satisfaction of one competes with the satisfactionof the other wants, hence the most important wants are satisfied first.

 

 

 

 

(c)They are complimentary: Satisfaction of one want gives rise to another want. For example when a student acquires a fountain pen; the need for ink arises.

 

 

 

(d) They are repetitive (recurrent):This means that after they have been satisfied once, the wants recur thereby creating the need to satisfy them again. For example, after taking breakfast,one needs to take lunch, supper and breakfast again.

 

 

 

 

(e)They are habit forming:This means that by using them you become a habitual user. For example, frequent use of tea makes one a habitual tea taker.

 

 

 

(f) They vary in urgency and intensity:For example, in January, the need to pay school fees and buy school uniform is more urgent and intense than buying a pair of jeans.

 

 

 

g) They are universal:This means they are required by everyone in the world.

 

 

 

 

 

 

 

 

Characteristics of goods

1. They are tangible.2. They can be stored.3. They can be standardized..4. They can be seperated from the producer.

Characteristics of services

1. They are intangible.2. They cannot be stored.3. They cannot be standardized.4. They are inseperable from the producer.

 

 

 

Economic ResourcesEconomic resources refer to things that are required to produce goods and services to satisfy human wants.Example includes land, machinery, tools and labourers.Characteristics of economic resourcesScarceThey are limited in supply in relation to the total wants which they have to satisfy. Monetary value.They are valued in terms of money and therefore a price has to be paid in order to obtain them.Unevenly distributed.They are not found everywhere and are also not found in equal amounts on the earth's surface .

Have alternative uses.That is a choice has to be made as to which use they will be put to.Have utility .This is the ability of being useful or satisfying human wants.They are transferable.Some can be transferred from one person to another.

 

 

 

 

 

 

 

 

 

 

Scarcity

means that goods and services are limited in supply in relation to demand for them.

Choice

Scarcity of economic resources makes choice necessary regarding what want to satisfy first with available resources. This is done with a scale of preference. A scale of preference is the order in which wants are to be satisfied starting with the most pressing wants and ending with the least pressing wants

Opportunity costSatisfaction of wants involves sacrifice. Opportunity cost is the alternative foregone in order to enjoy another good or service.ExampleMary had kshs.25 with which to buy either a pen or a loaf of bread. If she buys a pen, the loaf of bread is the opportunity cost.

Production

By the end of the topic, you should be able to:(a) explain the meaning of production

(b) distinguish between different types of utilities

(c)distinguish between direct and indirect production

(d)describe the levels of production and occupations related to each (e) discuss the factors of production and the reward for each(f) explain the role of division of labour and specialization in in the production process (g) classify goods and services produced in an economy.

Meaning of productionProduction means creation of goods and services in order to increase their usefulness to the

consumers.The process of production is incomplete until the goods reach the final consumers

Click below to see the various stages of tea production

TEA PLANTING

 

 

TEA PLANTATION

 

 

 

TEA PROCESSING

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

UtilityMeaning of utilityUtility is the usefulness of a good or service or the ability of a good or service to satisfy a human want.Types of utilitiesForm utility-This is the conversion of raw material into finished products

 

 

 

 

 

 

.Place utility-This is taking of goods and services from producers to consumers. It is created through distribution.

 

 

 

 

Time utility-This is making goods and services available to the consumers all the time they need them. It is created through storage

 

 

 

 

Possession utility-This is transfer of ownership of a good from the seller to the consumer. It is created through process of exchange

 

 

 

 

 

Factors of Production

Factors of production 

For production to take place various factors are involved. Imagine you are visiting a factory. What would you see?

Insert a factory with factors visible

 

 

 

 

First and foremost, you would see land and buildings. Inside the buildings, you would find machineries, equipment, employees, or workers. Most probably there will be electricity or any other source of energy to run the machines.There would be tea which is being processed. Then you may also find vehicles bringing in the raw tea leaves and others taking away the processed tea leaves to the market. All these things seen in a factory can be classifed as either land, capital ,labour or Entrepreneurship. Land ,Labour , Capital and Entrepreneurship are the factors of production.

Meaning of factors of production

Factors of production are the resources which facilitate production of goods and services.They include land, labour, capital and the entrepreneurshipLand; includes the site on which the factory is built and other natural resources .Land refers to all natural resources for example farmland, water etcLabour; These are the factory employees. Labour refers to all the physical and mental contribution of an employee in the process of production.Capital; This refers to the buildings and equipment used to make the products. Capital refers to all those items that go into producing goods and services.Entrepreneurship;This is the the organisation of other factors of production ie land, labour and capital into suitable proportions.

UtilityMeaning of utilityUtility is the usefulness of a good or the ability of a good or service to satisfy a human want.Types of utilitiesForm utility-This is the conversion of raw material into finished products

 

 

 

 

 

.Place utility-This is the bridging of geographical gap between the place of production and place of consumption. It is created through distribution

 

 

 

 

Time utility-This is the bridging of the gap between time of production and time of consumption. It is created through storage

 

 

 

 

Possession utility-This is transfer of ownership of a good from the seller to the consumer. It is created through process of exchange

 

 

 

 

 

Rewards of factors of production

They are the payments made for use of factors of production.

 

.

Direct production refers to production of goods and services for one's own consumption while indirect consumption is the production of gooods or services for sale.

DIRECT   PRODUCTION                                       INDIRECT PRODUCTION

Division of labour and specialization Division of labour refers to breaking down of the production process into stages and assigning each stage to one worker or a group of workers.The individuals in this stages are said to be specialized in what they do. Specialization therefore is where an individual concentrates on one line of production in which he/she is best suited.The speciality could be in terms of skills, qualifications or experience.

Role of division of labour and specialization

1. Increases output per worker 2. Encourages invention and innovation3. Encourages the user of machines 4. Enables workers to gain skills in aparticular field

 

 

 

 

Levels of production and their occupations

(a) Primary level

This involves the extractions of natural resources from their natural state.

Occupations in this level include;lumbering,farming,mining etc.

 

 

 

 

 

(b) Secondary level

This involves transforming of raw materials into finished products.

It includes:

(i) manufacturing industries e.g food processing and textile making lass="bodytext1">(ii)construction industries e.g road construction and buildings of houses.

Occupations in this level include: carpentry, masonry and engineering.

A tyre factory

 

 

(3)Tertiary level;

Tertiary production involves provision of services. These services could either be commercial or personal.

Commercial services include the services in movement, storage and distribution of goods.

Personal services :These are direct personal services. They involve provision of services where the provider of the service and the reciever are in close personal contact.

Occupations involved in this level include banking,retailing,insuring

 

 

 

 

 

 

 

 

Classification of goods and services

Goods and services can be classified on the following basis:-

a) Producer and consumer goods

Producer or capital good refers to goods used to produce others goods or to provide e.g machines.

Consumer goods refer to goods used directly by the consumer. Examples include bread ,cars, watches e.t.c.

d) Durable and perishable goods

Durable goods are those that that last for long period of time .Examples are furniture , buildings ,earings e.t.c

Perishable goods are also called non- durable goods .They arev those goods which cannot last for a long period of time .Examples are milk,bananas, cabbage e.t.c.

c) Material and non material goods

Material goods are those that one can see, feel and touch.

Non-Material goods are those that we can not touch or see. They include services such as medical care teaching , legal services e.t.c.

D) Private and public goods

Private goods are goods owned by individuals for their own use . Examples are private house , personal car etc.

Public goods are those goods that can be used by any member of thepublic . They are either owned by the govrnment or community . Examples are public roads, public schools , public hospitals , public stadiums etc.

 

 

 

 

 

 

 

 

 

 

Rewards of factors of production

Rewards are the payments for factors of production

 

.

DIVISION OF LABOUR AND SPECIALISATION .

Division of labour.

This refers to breaking down of production process into stages and assigning each stage to an individual.

Specialisation.

This refers to where one concentrates on one line of production in which he/she is best suited.

Role of division of labour and specialisation .

1.Increases output per worker.

2.Encourage invention and innovation.

3.Encourage the use of machines.

4.Enables the worker to gain skills in a particular field.

CLASSIFICATION OF GOOD AND SERVICES PRODUCED IN AN ECONOMY.

Goods and services can be classified on the following basis

(a)Producer or consumer goods.

Producer goods/capital goods refers to goods used to produce other goods or to provide services . e.g machines.

consumer goods refers to goods used directly by the final consumers e.g.bread, private car and watch.

(b)Durable and perishable/non- durable goods.

Durable goods are those expected to last for along period of time.e.g.Buildings,furniture and earings.

Perishable/non-durable goods are those goods which cannot last for a very long time e.g meat,ripe bananas and chalk.

(c) Material and non-material goods.

Material goods are those that one can see,feel and touch.

Non-material goods are those we cannot see or touch .They are the same as services .e.g medical care,teaching and legal services.

(d)Private and public goods.

Private goods are goods owned by an individual for his/her personal use.

Examples include; private house ,personal car.

public goods are those that can be used by any member of the public.They are either owned by the government or by the community.e.g publi roads,public hospitals public schools.

FACTORS OF PRODUCTION

 

 

 

 

 

Activity 1.Outline five factors that may limit the number of entrepreneurs in an area

(a)(b)(c)(d)(e)

Solution

 

 

 

Entrepreneurship By the end of this topic, you should be able to:(a) explain the meaning of entrepreneurship(b) discuss the importance of entrepreneurship to an economy (c) describe the characteristics of an entrepreneurd) generate business ideas(e) identify a business opportunity(f) evaluate a business opportunity

(g)explain the need for a business plan (h) discuss the factors that may influence entrepreneurship practices in Kenya. (i) discuss the causes of business success(j)recognise need for ethical practices in business

Meaning of EntrepreneurshipAn entrepreneur is a person who identifies a business opportunity,assesses the risks involved,provides and organises neccesary resources to start and run a successful business.

Entrepreneurship is the process of identifying a business opportunity and organising resources to start and run a successful business.

 

Characteristics of an entrepreneurThe following are characteristics of an entrepreneurDraw diagram as in the script

 

Risk taker; he or she bears any loss that may befall his or her business.

Hardworking; entrepreneurs work very hard and some of them are so committed to their work that it becomes like a hobby.

Self confident; entrepreneurs must believe in his/her abilities. The person has to be positive towards challenge.

Innovative; he/she should be able to come up with new ideas and be flexible to accept ideas from other sources.

Persistent and patient; entrepreneurs should not give up easily. they need to work with determination and try different approaches to achieve their goals

Flexible; he /she should always be adoptive to changes in business circumstances.

Initiative he/she has to design measures to improve business.Persuasive; he /she should give his energy to the achievement of his or her goals.

Time conscious; he /she ought to utilize all the time available in the best wayGoal oriented; he/she has to remain focused to his/her business goals.

Creative; entrepreneurs need to be people with a lot of ideas which they want to put into practice.

 

Ethical issues in business Ethics refes to moral principles or a set of moral values held by an individual or a group.Business ethics therefore are values and principles which the business is expected to operate within in order to ensure fair play in business.Examples of ethical issues in business include the following :

1. Involvement in community welfare by avoiding pollution and conserving environment.2. Ensuring fair competition.

3. Selling safe products to consumers. 4. Avoiding sale of illegal commodies. 5. Avoiding discrimination in employing, training and promotion of staff. 6. Social responsibility i.e donating to the society . 7. Complying with laws and regulations.

Importance of entrepreneurship to an economy

1. Creation of employment-the bussinsses formed employ a large number of people. 2. Formation of capital e.g. the money generated by entrepreneurs is reinvested in various

ventures3. Utilization of available resources-entrepreneurs make good use of the country resources.4. Raises the standard of living- the money earned by entrepreneurs makes them live a

better life.5. Increased variety of goods. Increases the variety of goods available to consumers.6. Leads to improved infrastructure in their area of operation-It leads to development of

roads, water ,electricity etc in areas where they operate.7. Increased competition. Entrepreneurs increase competition which leads to provision of

better quality of goods, increased quantities and fair prices.8. Entrepreneurship leads to consumers having a big range of goods from which to choose

from. 9. It leads to promotion of technology-entrepreneurs use appropriate technology. Both new

and old technology is adapted and improved.

 

 

 

 

 

 

 

Causes of Business Success

Characteristics of an entrepreneurThe following are characteristics of an entrepreneur

Draw diagram with animation of the characteritics of an entreprenuer so that when clicked te explanations appear.

Risk taker; he or she bears any loss that may befall his or her business.

Hardworking; entrepreneurs work very hard and some of them are so committed to their work that it becomes like a hobby.

Self confident; entrepreneurs must believe in his/her abilities. The person has to be positive towards challenge.

Innovative; he/she should be able to come up with new ideas and be flexible to accept ideas from other sources.

Persistent and patient; entrepreneurs should not give up easily. they need to work with determination and try different approaches to achieve their goals

Flexible; he /she should always be adoptive to changes in business circumstances.

Initiative; he/she has to design measures to improve business.

Persuasive; he /she should give his energy to the achievement of his or her goals.

Time conscious; he /she ought to utilize all the time available in the best wayGoal oriented; he/she has to remain focused to his/her business goals.

Creative; entrepreneurs need to be people with a lot of ideas which they want to put into practice.

 

Generating Business IdeasInsert a drawing of a person with various business ideasThe main objective of generating business ideas is to get as many ideas as possible.These ideas are then evaluated to establish the most suitable one. The following are some of the ways of generating business ideas,

Building on ones skills, hobbies or interests.

Improving an existing ideas Combining two existing business ideas Identifying a market niche (gap) Listening to what people say Gaining from waste products Analyzing existing business

Setting out to solve a particular problem

 

Characteristics of an entrepreneurThe following are characteristics of an entrepreneur

 

 

 

 

 

 

 

Risk taker; he or she bears any loss that may befall his or her business.

Hardworking; entrepreneurs work very hard and some of them are so committed to their work that it becomes like a hobby

Self confident; entrepreneurs must believe in his/her abilities. The person has to be positive towards challenge.

Innovative; he/she should be able to come up with new ideas and be flexible to accept ideas from other sources.

Persistent and patient; entrepreneurs should not give up easily. they need to work with determination and try different approaches to achieve their goalsFlexible; he /she should always be adoptive to changes in business circumstances.

Initiative he/she has to design measures to improve business.

Persuasive; he /she should give his energy to the achievement of his or her goals.

Time conscious; he /she ought to utilize all the time available in the best wayGoal oriented; he/she has to remain focused to his/her business goals.

 

Creative; entrepreneurs need to be people with a lot of ideas which they want to put into practice.

 

 

 

 

 

 

 

Generating business ideas The main objective of generating business ideas is to get as many ideas as possible.These ideas are then evaluated to establish the most suitable one. The following are some of the ways of generating business ideas,

 

Click below to view more sources of ideas

Building ones skills, hobbies or interests Improving on an existing business idea Combining two existing business ideas Identifying a market niche (gap) Listening to what people say Gaining from waste products Analyzing existing business Setting out to solve a particular problem

 

 

 

 

 

 

Business opportunities A business opportunity is any chance that a person may get which can be exploited by selling either a product or a service at a profit.A business opportunity exists when there is a gap (a need) to be filled in the market.However before exploiting the opportunity needs to consider the following:

1. The unsatified needs

2. Change in demand for goods

3. Change in technology

4. Change in fashion ,taste and prefrences

5. Change in government policy

6. Opportunities due to disasters

 

 

Importance of Business Plan

Evaluating a business idea This involves screening of business ideas so that only those that may lead to a successful business are pursued. This is required even if the business idea to be considered is only one.

Business idea These are thoughts from which a person identifies a business opportunity; such thoughts may come from the following sources;1) Media for example newspapers, internet,radio and magazines

 

 

 

2) Shows and exhibitions3) Hobbies

4) Vocational training and experience5) Surveys and events e.g catering and floral services for a wedding

 

 

 

 

 

 

 

 

 

 

 

 

GENERATING BUSINESS IDEAS

Insert a drawing of a person with various business ideas

 

Causes of Business Success

 

Business Plan

(youth leader addresing the manager's secretary)

Youth leader: Good morning madam

Serectary: Good morning, how can i help you?

Youth leader: We are a youth group from Mashinani village.We would like to see the manager.

Secretary: Is it about something that i can help?

Youth leader:We would like to talk to her about a loan we wish to borrow from your bank.

Secretary: If its a loan you need to see her personally. Please go right in.

(they enter the managers office)

Youth leader: How are you madam manager?

Manager: I am fine, have a seat. How can i help you?

Youth leader: We are representatives of a youth group which wants to start a cyber cafe in our village. We are requesting for a loan to undertake the project.

Manager: May i see your business plan?

Youth leader: A business Plan?! What is a business plan?

Manager: A business plan is a formal statement of business goals and objectives,its operations and the plans on how to achieve those goals and objectives.It shows everything that the business will do and how they will do it.

Youth leader: It seems to be a very important document . Is the business plan important to us?

Manager: Yes, it is very important.In this bank, we do not give loans to any business without a business plan.Infact let me give you more reasons why you should prepare a business plan.

Click above to see other importance of a business plan.

Importance of Business Plan

Factors to consider when evaluating a business opportunity

1. Availability of the market and what the market requires, for example quantity of products required, quality of products, types of goods /services to produce and prices to set for the products

2. Financial requirement e.g. the initial and operating capital required3. Equipment required; appropriate equipment should be considered in order to reduce

production cost. Entrepreneur should consider if to purchase the equipment or to hire/lease.

4. Government policy entrepreneur should consider all the legal requirements related to the business activities, such as licenses, taxes, labour laws, health requirements etc

5. Infrastructure; entrepreneur should select an ideal location with a good transport and communication network to ease movement of inputs to the firm and products to the market

6. Labour requirements; entrepreneur should consider the type of labour required for example skilled, unskilled or semi skilled

7. Society expectations; the entrepreneur should know about the existing attitudes, practices and beliefs to meet their requirements

      

FACTORS THAT INFLUENCE ENTREPRENEURIAL PRACTICES IN KENYA

1.Finances

Availability of finance normally facilitaties entrepreneurial practices.unavailability of finance make entrepreneurs lack capital to start and sustain a business.

2.Level of technology.

An organisation that embraces new technology succeeds while that one that fails to change with technology may fail. Due to poor access to modern technology; many entrepreneurs in developing countries still use outdated machines and equipments for production.use of appropriate technology is also important.

3.Infrastructure.

Examples of infrastructure include roads, water and electricity.Proper and developed infrastructure make businesses to grow faster than in situations where it has not been developed. Poor infrastructure has hinders marketing of entrepreneur products.

4. Level of training;

Many entrepreneurs lack relevant business training and management skills ,thus are needed in running of a business..

5.Government policies:

Some government policies may encourage or hinder entrepreneurial activities.It is important for governments to have policies that promote entrepreneurship.

6. Level of competition.

Competition may make businesses to succeed by producing high quality products or fail if they result to wastiful competition.However "cut-throat"competition should be discouraged.

7.Existing entrepreneurial culture.This should be encouraged through education and government policies.

 

 

 

 

 

 

 

 

 

 

BUSINESS SUCCESS Insert diagram

Business success is the ability to achieve the stated objectives of the business.

This topic will be learnt in form of the activity below.

Activity:

In the spaces provided below indicate with a tick whether each of the following statement is true or false.

STATEMENTS

 

1.Wrong choice of business may lead to business faillure

2.Sufficient funds will contribute to business success.

3.Ideal location of a business will lead to business success.

4.Attending to customers needs causes business success.

5.Proper allocation of resources adversly affect business growth.

6.Poor marketing strategies may cause business failure.

7.Use of appropriate technology may cause business failure.

SOLUTIONS.

1.True 2.True 3.True 4.True 5.False 6.True 7.False

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BUSINESS FAILUREInsert diagramBusiness failure refers to the inability of a business to achieve the stated objectives of the business.Activity 2 In the spaces provided below, indicate with a tick whether each of the following statement is true or false

STATEMENTS  TRUE FALSE

1. Poor choice of business 2. Insufficient funds3. Penetration of a new market4. Poor location of the business5. Ignoring customers needs6. Low level of competition7. Poor allocation of resources8. Low prices than that of competition9. Failure to keep the business records properly10. Poor marketing strategies11. Poor pricing12. Use of inappropriate technology13. Inadequate training

Solution1. true 2.true 3.false 4.true 5.true 6.false 7.true 8.false 9true 10.true 11.true 12.true 13.true

 

 

FUNCTIONS OF MANAGEMENT

Planning; involves making decisions today about what is to be done tomorrow/future.

Organizing; it is the allocation of duties and tools required for carrying out duties and responsibilities within the business.

Staffing; it refers to getting the people to do the jobs that the business require in the best way possible to achieve the objectives of the business

Controlling; it involves regulating activities of the business by giving advice and direction so that work is done according to plan.

Co-coordinating. This means making sure that all the various parts of a business pull in the same direction to achieve goals of a business.

 

Insert the drawing

Exercise Instruction.

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Role of technology in businessDefinition of technology in businessThis is the application of scientific knowledge in business management

Role of technology Insert a diagram showing Comparison of old and new technology

Old Technology                             New technologyLow quantity of production at high cost.    Improved quantity of production at low cost.                                                                           Low quality products.                                 Mass production of high quality goods                                                                                  No new products                                         Innovation and invention of new productsPoor methods of communication                Improves communication methods e.g. e-mailInaccuracy in production                             Facilitates accuracy

Hard business transactions                          Simplifies business transactionsHard to perform tasks                                 Simplifies performance of tasks.

 

 

 

 

Emerging issues and practices in themanagementofabusinessThis refers to the recent changes/trends in the management of a business.They include

 

 

 

 

 

 

 

 

 

Privatization of government business

Employing senior staff on performance contract basis

Retrenchment and downsizing

Closing down loss making branches

Setting mission and vision statements of the business

Establishment of customer care departments

 

Adoption of dynamic technology e.g. automation

Social and corporate responsibilities.

Use of suggestive boxes to get feedback from customers

Mergers and takeovers

Transparency and accountability

Employing multi-skilled staff

Franchising refers to a situation where a business gets a license to produce using the name of an established product

Use of term human resource instead of personnel

 

 

 

 

The office

By the end of the lesson , you should be able to:

(a) explain the meaning of an office

(b)explain the functions of an office

(c)describe the various office layouts

(d)explain the uses of various office equipment

(e)discuss the role of filing in an office

(f)discuss the duties of various categories of office staff

(g) describe essential qualities of each category of office staff

(h)discuss trends in office management.

 

Meaning of an office

An office may be defined as a building, a room(s) or a place set aside by an organization where administrative, communication, clerical, secretarial and accounting work are routinely

conducted.

 

By the end of the lesson , you should be able to:

a) explain the meaning of an office

b) explain the functions of an office

c) describe the various office layouts

d) explain the uses of various office equipment

e) discuss the duties of various categories of office staff

f) describe essential qualities of each category of office staff

g) discuss the role of filing in an office

h) discuss trends in office management.

 

Functions of an office

(a) communication

 

 

 

 

 

(b)filing

 

 

 

 

 

3.Reproduction of documents

 

 

 

 

4.Mailing

 

 

 

 

5. Safeguarding and controlling the organisation's property

 

 

 

 

 

 

 

Types of office layoutOffice layout refers to the outlook, arrangement, and positioning of furniture and equipment in an office.The most common types of office layout are:

(a) open office

This is a large room where all staff work, but are grouped according to the work they do for example in banks

 

 

 

 

 

(b)partitioned office

This is a set-up where staff members are allocated their enclosed rooms from where they do their work

 

 

Meaning of office staffStaff refers to a team of employees working for an organization to achieve its goalsCategories of office staffThe office staff can be categorized into;

managerial

Junior

Subordinate

 

 

 

 

 

 

Essential qualities of office staff..

The success of any enterprise is determined by the impression that the office creates to those who visit the organisation.The office workers should be efficient in the provision of services. The main qualities that enable an office worker to perform well can be classified into three categories.

(a) PERSONAL ATTRIBUTES

This refers to the general appearance of a person.An office worker should have a presentable and a pleasant personality.

e.g good health.

(b)OFFICE ETIQUETTE.

This refers to the generally accepted code of conduct in an office.e.g honesty.

(c)KNOWLEDGE AND SKILLS.

The office worker should have the relevant academic and proffesional qualifications necessary to perform the duties given to him/her.

To Learn more on the qualities of Office staff go to the Quiz

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Meaning of Office Staff

Staff refers to a team of employees working for an organization to achieve its goals.

Staff meeting

Categories of office staff

The office staff can be categorized into;

Managerial

This category of staff formulates, implements and supervises policies in an organizationThese employees include managers, company secretaries, financial officers, and accountants among others.

Junior

They are involved in actual implementation of the organization policies. They include machine and equipment operators, receptionists, telephone operators, account clerks. These employees are usually specialized in certain skills.

Subordinate / Support

They assist the junior staff and management in achieving the organizational goals. They perform non specialized jobs and usually are semi-skilled or unskilled. They include messengers, cleaners and grounds people.

To learn more about the duties of office staff go to the exercise.

Junior staffThey are involved in actual implementation of the organization policies. They include machine and equipment operators, receptionists, telephone operators and account clerks. These employees are usually specialized in certain duties.

 

 

 

 

 

Support staff

They assist the junior staff and management in achieving the organizational goals. They perform non specialized jobs and usually are semi-skilled or unskilled. They include messengers, cleaners and ground people . They are also referred to as subordinate staff.

 

 

 

 

 

 

 

 

 

 

 

 

Click on the bottom right for more....

 

 

Essential qualities of office staff

The success of any enterprise is determined by the impression that the office creates to those who visit the organisation.The office workers should be efficient in the provision of services. The main qualities that enable an office worker to perform well can be classified into three categories.

(a) Personal attributes

This refers to the general appearance of a person.An office worker should have a presentable and a pleasant personality.

e.g good health.

(b)Office ettiquette

This refers to the generally accepted code of conduct in an office.e.g honesty.

(c)Knoledge and skills

The office worker should have the relevant academic and proffesional qualification necessary to perform the duties given to him/her.

 

 

 

Activity

The following are the duties of office staff. In the table below match each duty with the appropriate office staff i.e. managerial, junior or support staff.

Duties of office staff  Type of office staff

Collecting mails from the post office

Taking minutes during meetings

Recording transactions of a company

Coordinates operations of a business

Planning the work and the time schedule in an organization

Receiving and directing visitors to their respective destinations

Cleaning the compound

Ensure offices are clean and properly arranged

Supervision and coordination of office staff

Manages the organizations switchboard

In charge of documents stored in the files

Controls use of raw materials

Advising management on financial related decisions

 

SolutionsSupport supportJunior support Junior managerialManagerial juniorManagerial juniorJunior managerial

 

 

 

 

 

Qualities of office workersThe pie chart below shows the qualities of various categories of office staff.Insert the drawing of a pie- chartSolutiona. Personal attributes            1. Hygiene   2. Good health3 .Neat and smart     4. Good postures

  b. Office etiquette           

1. Respect2. Honesty3. Courtesy4. .Loyalties5. Cooperative6. Diplomacy7. Accuracy8. Initiative9. Punctuality10. Organized11. Industrious

c. Knowledge and skill knowledge                         1. Skills 2. Experience

 

Qualities of office workersThe pie chart below shows the qualities of various categories of office staff.Insert the drawing of a pie- chartSolutiona. Personal attributes            1. Hygiene   2. Good health3 .Neat and smart     4. Good postures

  b. Office etiquette           

1. Respect2. Honesty3. Courtesy4. .Loyalties

5. Cooperative6. Diplomacy7. Accuracy8. Initiative9. Punctuality10. Organized11. Industrious

c. Knowledge and skill knowledge                         1. Skills 2. Experience

 

TYPES OFFICE EQUIPMENT

(a)paper punch--...........makes uniform holes in documents for easy filing.

 

(b)stapler---------------pins papers together.

 

(c)staple remover ....removes staple pins from papers

(d)computer--- ----------records,processes and store information

 

 

(e)Telephone-------------recieves and sends messages.

(f)typewriter--------------used to type out information neatly.

 

 

(g) duplicating machine----used to make copies from stencils.

(h) dictaphone------------tape recorder,used to record dictated messages for accuracy.

 

(i)paper shredders-------used to cut unwanted documents into small pieces to destroy them.

(j) guillotine machine------ cuts papers into the required sizes.

 

(k)franking machine-----printing stamp impressions on envelopes.

(l) letter openers --------neat opening of envelopes

 

(m)calculators -----------for all types of calculations.

(n)money counters------- for counting currency

 

 

 

(o) photocopier---------reproduce copies from originals using photographic mechanism

 

 

(p)facsimile(fax)--------used for transmiting graphic communication in form of writing or drawing.

 

 

 

Definition of filing.

Filing is the process of classifying or arranging of documents and records for easy retrieval by office staff.It can be done in two ways.

(a) Electronically--- This is done by creating files and folders in computers.

 

 

 

(b)Manually -----This is done in files which are then put in filing cabinets

 

 

 

 

 

 

 

 

 

Trends and emerging issues in office management

 

 

 

 

 

Customers care.

The focus is towards giving maximum attention to customer needs.

 

Paperless and removal of physical offices.

The office layout is changing towards open plan where customers interact with office staff e.g in banking halls.

Most of the records and documents are kept in computers.

 

Digital/adptation of modem technology.

The information and communication system has been introduced to enhance the flow of the information within and outside the organisation.

 

 

E-offices

An officer can communicate with the main office through the internet without being physically in the office.

Employment of muilti skilled persons.

Employees are encouraged to have different skills e.g marketing and accounting skills.

 

Corporate culture.

The organisations inculcates positive image through sponsoring activities in the community and also within the organisation itself.E.g enviromental issues corruption and ethical issues.

 

 

 

 

 

 

 

 

 

Exercise

 

 

Down1. A document used to demand payment2. Documents used to reply a specific letter of inquiry.3. A document issued when payment is made.4. An illustrated reply to a general inquiry

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Home trade By the end of this topic, you should be able to:

a)explain the meaning and importance of trade

b)classify trade

c)explain the forms of home traded)discuss the types and functions of retailers

e)discuss the types and functions of wholesalers

f)describe the documents used in home trade.

g)explain the means of payments used in home trade and the circumstances in which they are used.

h)explain the terms of payment used in home trade and circumstances in which they are used.

 

What is Home Trade?

 

Definition

Home Trade is the buying and selling of goods and services within a country, with an aim of making profit.

Definition of tradeTrade is buying and selling of goods and services with an aim of making profit.

It may also involve exchange of goods for goods or services eg in barter trade.

 

 

A Central Business District

 

Insert a drawing that depicts trade i.e. buying and selling (exchange) Importance of tradeInsert the diagram of a market in a colorful manner

 

not colourful insert colour

 

CLASSIFICATION OF WHOLESALERS

 

 

 

 

 

Whosalers can be classified according to the following;

(a)Range of products handled

(b) Geographical area covered.

(c) Method of operation

 

 

 

 

 

FUNCTIONS OF WHOLESALERS.

the following functions should be audio

(A) LINKAGE

-Acts as a link between the producer and retailer.

(B) STORAGE

-Provides storage to ensure continous supply.

(C) BULK BREAKING

-Buy in large quantities from producers and sell in smaller quantities to the retailers.

(D) TRANSPORTATION

-Help in reducing transportation cost for the producers by providing quick frequent delivery to the retailers. This also helps in reducing the risks for the retailers.

(E) PRICE STABILITY.

-They maintain price stability by storing excess supply when production is high and increasing supply when production is low.

(F) PROVISION OF CAPITAL

-Provide working capital to manufacturers by making prompt payments.This enables manufacturers to produce in large quantities.

(G) MARKET RESEARCH.

-Assist in conducting market research and offer advice and useful information about the market conditions and the products to the manufacturers.

(H) PRODUCT PROMOTION.

-Undertake the responsibility of branding and packaging of products hence take the burden of advertising.

 

Classification of trade

(a) Home trade

(i) Retail trade

(ii) Wholesale trade

(b)Foreign or international trade

(i) Export trade

(ii) Import trade

 

Functions of wholesalers

 

 

 

(a) Linkage

They act as a link between the producers and retailers.

(b) Storage

They provide storage of goods to ensure continuous supply.

(c) Bulk breaking

They buy in large quantities from producers and sells in smaller quantities to the retailers.

(d) Transportation

They help in reducing transportation cost for the producers by providing quick frequent delivery to the retailers. This in turn helps in reducing the risks for the retailers.

(e) Price stability

They maintain price stability by storing excess supply when production is high and increasing supply when production is low.

(f) Provision of capital

They provide working capital to manufacturers by making prompt payments for the goods they take.This enables manufacturers to produce in large quantities.

(g) Market research

They assist by conducting market research and offering advice and useful information about market conditions and the products to the manufacturers.

(h) Product promotion

They undertake the responsibility of branding and packaging of products hence take the burden of advertising.

 

 

 

 

WHOLESALE TRADE.

Wholesaling refers to buying goods in large quantities from manufacturers or producers and selling them in convinient quantities.

 

Types of Retailers

 

 

 

Differences between large and small scale retailers

Large scale retailers                                                   small scale retailers

Differences between large and small scale retailers2

Large scale retailers small scale retailersRequire large amount of capital to start and run requires small amount of capitalEmploy people to run them mostly run by ownersThey are highly inflexible highly flexibleUsually occupy large spaces in big building usually occupy small spacesHave stores to hold their stock do not usually own storage facilitiesMostly purchase their stock from manufacturers purchase goods from wholesalers

FUNCTIONS OF RETAILERS.

this should be accompanied by audio explanation

(A)AVAILING GOODS TO CONSUMERS

(B)STORAGE OF GOODS.

-buys goods and stores them until they are needed by the consumers.

(C)BULK BREAKING

-buys goods in large quantities from wholesalers and sells the in smaller quantities as desired by the consumers.

(D)FINANCING.

-may sometimes finance the consumers by providing them with credit facilities.

(E) AFTER SALE SERVICES

-provide to the customers such services as transportation,installation,repairs and maintainance.

(F)ADVICE

-due to the regular contact with consumers of various products,the retailer is able to interpret the consumers wants and therefore in a position to advice the wholesaler or the manufacturer about the consumers needs.

(G) PRODUCT PROMOTION

-the retailer will help in promoting the products through such activities as displays.

Functions of retailers

 

 

 

 

(a)Availing goods to customers

They bring goods nearer to the customers and avails them when needed.

(b)Storage of goods

They buy goods and stores them until they are needed by the consumers.

(c)Bulk breaking

They buys goods in large quantities from wholesalers and sells the in smaller quantities as desired by the consumers.

(d)Financing

They may sometimes finance the consumers by providing them with credit facilities.

(e) After sale services

They provide to the customers such services as transportation,installation,repairs and maintainance.

(f)Advice

Due to the regular contact with consumers of various products,the retailer is able to interpret the consumers wants and therefore in a position to advice the wholesalers or the manufacturers about the consumer needs.

(g) Product promotion

The retailer will helps in promoting the products through such activities as displays.

Documents used in home trade

A document refers to written/printed materials that may be used as record or evidence. It therefore follows that a business record is an evidence/record used to show that exchange of goods or services have taken place between the buyer and the seller.These documents can be either from the seller or the buyer.

 

Click on the button on the bottom left below to read more

 

 

 

 

 

 

 

 

 

 

 

Letter of Enquiry; this is a document sent by a potential buyer to a potential seller seeking to find out more about details about goods which the seller has.

Quotation; it is used to reply to an inquiry which is specific in nature.

Price list; This is used to reply to a general inquiry. It contains names and prices of branded goods.

Catalogue; Used to reply to a general inquiry in a colorful and illustrated manner

.Advice note; Is used to inform the buyer that the goods are on the way

Delivary Note ; Accompanies the goods when they are being sent to be received by the buyer

Invoice; demand for payment from the buyer for all the credit transactions.

Credit note; This a document sent to correct an overcharge in an invoice

Debit note; correct an undercharge in an invoice

 

 

Means of payment

Means of payment refers to form or manner in which payment is made for goods and services.There are various means of payment currently in use. The means of payment can be put into four groups.

Means issued by the central bank Means provided by the post office Means provided by commercial banks Means which arise from private arrangement between traders and buyers.

Mean of payment

Means of payment refers to form or manner in which payment is made for goods and services.There are various means of payment currently in use. These means of payment can be put into four groups. These are

Means issued by the central bank

Means provided by the post office

Means provided by commercial banks

Means which arise from private arrangement between traders and buyers.

 

 

MEANS OF PAYMENT  PURPOSE (allign*****)

Central bank

Cash; i.e. currency notes and coins)

1. When settling small debts2. When the receiver does not have a bank account3. When it is possible to conclude a deal on the spot4. When it is readily acceptable to all people

 

 

 

Post office

 

Money orders;A document that facilitates the transfer of money from one person to another through the post office

Postal orders.It is a pre-printed means of payment used by the post office to send money

Postage stamps

Circumstances when postage stamps are used

1. When security is highly needed2. When sending small amounts of money3. When convenience is a necessity because post offices are spread all over the country4. When cost is a consideration since they are cheaper compared to a bankers cheques.5. When sending payment to places not served by banks especially in rural areas.6. When sending money to people and organization without bank accounts.

7. When there is need to cash money at any post office.8. When there is need to send small amounts of money9. When identification of the bearer is not required10. When one needs to make small payments11. When there is need for guaranteed payment

Commercial banks

 

Cheque; This is a written order by an account holder to his bank to make a specified payment to the named person.

Circumstances when used

1. When security is required2. When future reference is required3. When dealing with large sums of money since it is convenient to carry4. When there is need to transfer payment to a third party

 

 

 

 

Bank drafts/bankers chequeThis is a cheque drawn by a bank to a payee to guarantee payment of the amount indicated on the cheque

 

 

 

Credit transfer(bank order) This is a means used to make payment to a large number of people using one cheque

 

 

Standing orders;This is an instruction given by an account holder to his bank to be making periodic payment of a specific amount to a named person or institution for a specified period until the order is cancelled.Travelers chequeThis is a cheque drawn by one bank to another requesting the latter to pay a specified sum of money to a named bearer, who usually will have bought the cheque from the issuing bank

Telegraphic transfers.This is a faster and safer means of transferring money through a commercial bank, herby a person instructs a bank to transfer money by filling his/her name in a form and name of the payee, amount and bank where payment will be made

Circumstances under which they are Used

1. When security is paramount2. When there in need for guaranteed payment since they are issued against cash3. When urgency is desired as it is more readily acceptable4. Where payment by personal cheques is not acceptable

5. When there is need to reduce transaction costs for example using one cheque to make several payments

6. where there is need for convenience in making payment for fixed and regular payments eg payment of insurance premium

7. when there is need for convenience when traveling since they enable a person to travel without having to carry lots of cash8. when there is need for diversity that is can be used locally and internationally

9. when there is need for urgency10. when there is need for security’ since the payee has to give proper identification before being paid

 

 

 

 

 

ExerciseThe following statements relates to hire purchase. State whether the statement is true or false.Instructions

Using drag and drop show whether the following statements are true or false

 

Statement  true false

The buyer cannot resell the goods before completing the payments There is no deposit to be made Goods can be repossessed by the seller incase of defaultin payment The buyer owns the goods after the first installment An agreement to buy with no option of returning Goods are bought at a higher price Only involves durable goods

 

AnswersTrue FalseTrueFalseFalseTrueTrue.

 

 

Terms of payment

This refers to agreement or arrangement of how goods and services will be paid for.

 

 

 

 

Cash terms of payment

This is where the buyer receives goods or services and pays for them immediately

Spot cash; this is where the payment is made at the time of exchange.Cash on delivery; this is where the payment is made when goods are delivered.Cash with order; payment is made when ordering for goods.Prompt cash; where payment is expected within a few days, usually 7 days This is to enable the buyer to examine the goods delivered.

Circumstances under which cash terms of payment are used

When the buyer is new to the seller. When there is no trust.

When the buyer has history of not paying When the seller does not have enough stock. To avoid debt and collection expenses In case of mail order shops that transact business through post office. To avoid debtors rec0ords maintenance cost. In case it is the policy of the firm.

Deferred payments

These are payments which have been postponed to a stated future date.    Open credit; this is where payment is made after an agreement period of time    Installment buying; this includes credit sales and hire purchases, hire purchase refers to where the buyer is required to pay deposits and balance is made in equal installments. The hire purchase price is higher than cash price. This is because of interest charged. The good is on hire to the buyer until the last installment is made. Credit sales; this refers to where the buyer pays the buyer gets the ownership of the goods immediately the first installment is made Simple credit; credit extended for a maximum period of one week  Trade credit; credit extended by traders to other traders.Budget accounts. It is allowed to an approved customer who must operate an account with the seller. This agreement is made on maximum credit to be allowed to the buyer depending on deposit made. The buyer and the seller agree on schedule of payment to clear outstanding balance.Monthly accounts. Credit extended for a period of one month e.g. to salaried peopleCredit card . The credit card is given only to credit worth persons on application to credit card companies. The card allows the buyer to get goods and services from specific traders up to a given limit set by credit card companyThe credit company pays the trader and recovers the money from the credit card holder. The credit card holder is charged for the services offered

Circumstances under which deferred terms of payment are used

Incase of trusted salaried customers Incase of availability of adequate stock. When the seller wishes to attract more customers When the seller wishes to retain more customers When the seller knows the customers well Incase of a customer who buys goods regularly from the seller

 

 

 

 

 

Circumstances under which cash terms of payment are used

When the buyer is new to the seller. When there is no trust. When the buyer has history of not paying When the seller does not have enough stock. To avoid debt collection expenses In case of mail order shops that transact business through post office. To avoid debtors records maintenance cost. In case it is the policy of the firm

 

 

 

Credit facilities. The credit card is given only to credit worth persons on application to credit card companies. The card allows the buyer to get goods and services from specific traders up to a given limit set by credit card CompanyThe credi tcard company pays the trader and recovers the money from the credit card holder. The credit card holder is charged for the services offered

 

Deferred paymentsThese are payments which have been postponed to a stated future date. Open credit; this is where payment is made after an agreement period of time Installment buying; installments. The hire purchase pricthis includes credit sales and hire purchases. Hire purchase refers to where the buyer is required to pay deposits and balance is made in equal e is normally higher than cash price. This is because of interest charged. The good is on hire to the buyer until the last installment is made.

Credit sales; this refers to where the buyer pays the buyer gets the ownership of the goods immediately the first installment is made Simple credit; credit extended for a maximum period of one week Trade credit; credit extended by traders to other traders.Budget accounts. It is allowed to an approved customer who must operate an account with the seller. This agreement is made on maximum credit to be allowed to the buyer depending on deposit made. The buyer and the seller agree on schedule of payment to clear outstanding balance.Monthly accounts. Credit extended for a period of one month e.g. to salaried people

Credit facilities. The credit card is given only to credit worth persons on application to credit card companies. The card allows the buyer to get goods and services from specific traders up to a given limit set by credit card CompanyThe credit company pays the trader and recovers the money from the credit card holder. The credit card holder is charged for the services offered

Circumstances under which deferred terms of payment are used

Incase of trusted salaried customers Incase of availability of adequate stock. When the seller wishes to attract more customers When the seller wishes to retain more customers When the seller knows the customers well Incase of a customer who buys goods regularly from the seller

 

 

 

 

Exercise

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise

 

 

 

 

 

The following statements relates to hire purchase. State whether the statement is true or false.InstructionsUsing drag and drop show whether the following statements are true or false

 

Statement true false

The buyer cannot resell the goods before completing

 

the payments

There is no deposit to be made

Goods can be repossessed by the seller incase of default

 

in payment

The buyer owns the goods after the first installment

An agreement to buy with no option of returning

Goods are bought at a higher price

Only involves durable goods

 

 

AnswersTrue FalseTrueFalseFalseTrueTrue.