Business Principles

An organization that produces or distributes a good or service for profit is called a business. Profit is the difference between earned income and costs.

Every business engages in at least three major activities. The first activity, production, involves making a product or providing a service. Manufacturing firms create products that customers purchase to satisfy needs, whereas service firms use the skills of employees to offer activities and assistance to satisfy customer needs. Examples of service firms are doctors’ offices, airlines, restaurants, and home repair businesses.

Today the number of service firms far exceeds the number of manufacturing firms. For this reason, it is some- times said that we live in a service society.

The second activity that businesses are involved in is marketing. Marketing includes the activities between business and customers involved in buying and selling goods and services. The third activity, finance, deals with all of the money matters involved in running a business. Whether a business has one worker or thousands of workers, it is involved with production, marketing, and finance.