1.2What is a business?
A business is an activity that sells goods or services to customers to earn profit. Profit is what is left after paying all costs.
Businesses exist because people need things: food, phones, banking, medicines. A business that solves a problem well can earn profits year after year. When you buy a share, you buy a piece of these future profits.
Ramesh runs a tea stall. In a month he sells tea worth ₹60,000 (revenue). Milk, tea leaves, sugar, gas and rent cost ₹45,000 (expenses). His profit is ₹15,000.
ITC sells cigarettes, biscuits (Sunfeast), atta (Aashirvaad) and runs hotels. TCS sells software and IT services to companies around the world. HDFC Bank earns by lending money at a higher interest rate than it pays depositors. All of them are businesses, just much bigger than a tea stall.
- 1Customer pays money (revenue)
- 2Business pays costs (expenses)
- 3What is left is profit
- 4Profit is kept for growth or shared with owners
- Revenue = ₹60,000
- Expenses = ₹45,000
- Profit = ₹60,000 − ₹45,000 = ₹15,000
When you later study companies, you will look for businesses that earn profits consistently, not just once.
- A business sells goods or services.
- Revenue is money coming in; expenses are money going out.
- Profit = revenue − expenses.
- Shares give you a piece of a business’s future profits.
Q1. A bakery earns ₹2 lakh and spends ₹1.6 lakh. What is its profit?Show answer
₹2,00,000 − ₹1,60,000 = ₹40,000.
Q2. Name one business that ITC runs.Show answer
Cigarettes, packaged foods like Aashirvaad atta and Sunfeast biscuits, hotels, paper or agri-business.
Q3. Can a business have high revenue but no profit?Show answer
Yes, if its expenses are equal to or higher than its revenue.