Business ServicesClass 11 Business Studies NCERT Solutions
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Q1Long Answer Questions
What are services? Explain their distinct characteristics.
Solution
Services are defined as those separately identifiable, essentially intangible activities that provide satisfaction of wants and are not necessarily linked to the sale of a product or another service. They are economic activities where an interaction occurs between the service provider and the consumer. The purchase of a service does not result in the ownership of a physical object; rather, one experiences the service.
The distinct characteristics of services, also known as the five 'I's of services, are as follows:
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Intangibility: Services cannot be seen or touched; they are experiential in nature. For example, one cannot taste a doctor's treatment or touch entertainment in a cinema hall; one can only experience it. This makes it difficult for a customer to determine the quality of a service before consumption.
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Inconsistency: Services are not standardized and have to be performed exclusively each time. This is because different customers have different demands and expectations. A service provider often has to alter their offering to meet the specific requirements of each customer. For example, the service provided by a mobile service provider can be customized for different users.
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Inseparability: The production and consumption of services occur simultaneously. Unlike goods that can be manufactured and stored before being sold, services must be consumed as they are produced. For example, the service of eating in a restaurant involves simultaneous production (cooking and serving) and consumption (eating).
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Inventory (Less): Services are perishable and cannot be stored for future use. Since they have little to no tangible components, they cannot be kept in stock. This means that demand and supply must be managed carefully, as a service cannot be performed earlier to be consumed later. For example, a railway ticket can be stored, but the railway journey itself cannot be.
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Involvement: The participation of the customer in the service delivery process is a key characteristic. The customer has the opportunity to get the services modified according to their specific requirements. For example, in a self-service fast-food joint, the customer is directly involved in the process of receiving the service.
Q2Long Answer Questions
Explain the functions of commercial banks with an example of each.
Solution
Commercial banks are financial institutions that accept deposits from the public and provide loans for the purpose of consumption and investment to earn profit. They perform a variety of primary and secondary functions. The important functions are:
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Acceptance of Deposits: This is a primary function where banks borrow money from the public. They accept deposits through various types of accounts:
- Current Account: Meant for businesses, allowing unlimited withdrawals. For example, a retail store owner deposits daily sales into a current account.
- Savings Account: Encourages savings by individuals, with some restrictions on withdrawals. For example, a salaried person deposits their monthly salary into a savings account.
- Fixed Deposit Account: Funds are deposited for a fixed period to earn a higher rate of interest. For example, an individual deposits a lump sum of ₹1,00,000 for five years to save for a future expense.
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Lending of Funds: Banks lend the money collected through deposits to individuals and businesses and earn interest, which is their main source of income. Forms of lending include:
- Overdrafts and Cash Credits: Allowing customers to withdraw more than their account balance up to a certain limit. For example, a business is granted a cash credit limit of ₹5,00,000 to meet its working capital needs.
- Term Loans: Loans provided for a fixed term to finance capital expenditure. For example, a manufacturing company takes a term loan to purchase new machinery.
- Discounting Trade Bills: Banks provide short-term finance by discounting bills of exchange. For example, a seller discounts a bill of ₹50,000 due in three months with a bank to get immediate cash.
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Cheque Facility: Banks provide a convenient and inexpensive medium of exchange through cheques. They collect cheques drawn on other banks on behalf of their customers. For example, an individual receives a cheque from their employer and deposits it in their bank account for collection.
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Remittance of Funds: Banks facilitate the transfer of funds from one place to another through instruments like bank drafts, pay orders, or electronic transfers (NEFT/RTGS). For example, a student's parent uses a bank draft to send money to pay their college fees in another city.
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Allied Services: Besides the main functions, banks also provide several other utility services. These include:
- Locker Facilities: Providing safe deposit vaults for customers to store their valuables. For example, a customer rents a locker to keep their jewellery and important documents safe.
- Underwriting Services: Banks may underwrite the shares and debentures issued by companies, guaranteeing their sale.
- Other Agency Services: Acting as an agent for customers to perform tasks like paying insurance premiums, collecting dividends, and buying or selling shares.
Q3Long Answer Questions
Write a detailed note on various facilities offered by Indian Postal Department.
Solution
The Indian Postal Department provides a wide range of services across the country, managed through a network of 22 postal circles. The facilities offered are broadly categorized into financial, mail, and allied facilities.
1. Financial Facilities:
The post office provides various banking and investment services, especially in rural and remote areas. These include:
- Savings Schemes: They offer popular schemes like Public Provident Fund (PPF), Kisan Vikas Patra, and National Saving Certificates (NSC) for long-term savings and investment.
- Retail Banking Functions: The post office also performs normal banking functions through schemes like the Monthly Income Scheme, Recurring Deposits, Savings Account, and Time Deposits.
- Money Order Facility: This allows for the transfer of money from one person to another across the country.
2. Mail Facilities:
This is the core function of the postal department, involving the transmission of articles from one place to another.
- Parcel Facilities: This service handles the transmission of parcels and packages.
- Registration Facility: This provides security for the transmitted articles, ensuring they are delivered to the intended recipient with proof of delivery.
- Insurance Facility: This service provides insurance cover for all risks to valuable articles during the course of transmission by post.
3. Allied Facilities:
In addition to the above, the postal department offers several other modern and value-added services:
- Greeting Post: Offers a range of greeting cards for various occasions.
- Media Post: An advertising service where corporates can advertise their brand on postcards, envelopes, letterboxes, etc.
- Direct Post: A service for direct advertising, which can be either addressed or unaddressed.
- International Money Transfer: In collaboration with Western Union, this service enables remittance of money from 185 countries to India.
- Passport Facilities: The department partners with the Ministry of External Affairs to facilitate the process of passport applications.
- Speed Post: A time-bound and reliable service for delivering letters and parcels quickly, with a network covering over 1000 destinations in India and 97 major countries globally.
- e-Bill Post: A service for collecting bill payments across the counter for companies like BSNL and Bharti Airtel.
Q4Long Answer Questions
Describe various types of insurance and examine the nature of risks protected by each type of insurance.
Solution
Insurance is a device to spread the loss caused by an uncertain event over a number of persons exposed to it. It protects against potential financial loss. Insurance can be broadly classified into Life Insurance and General Insurance (which includes Fire, Marine, and other types).
1. Life Insurance
Life insurance is a contract where the insurer agrees to pay a specified sum of money on the death of the insured person or on the expiry of a certain period, in exchange for a premium. It is not just for protection but also serves as an investment.
- Nature of Risks Protected: It protects against two main risks:
- Risk of dying too early: This protects the family or dependents from the financial loss that would result from the premature death of the earning member.
- Risk of living too long: This provides financial support in old age when one's earning capacity is reduced or ends (i.e., retirement).
- Types of Policies: Whole Life Policy, Endowment Policy, Joint Life Policy, Annuity Policy, Children's Endowment Policy.
2. Fire Insurance
Fire insurance is a contract where the insurer undertakes to make good any loss or damage caused by an accidental fire during a specified period, up to the policy amount. It is a contract of indemnity.
- Nature of Risks Protected: It protects against the financial loss arising from the damage or destruction of property and assets (like buildings, machinery, stock) due to fire. The loss must be a direct result of an accidental and non-intentional fire.
3. Marine Insurance
Marine insurance is a contract that provides protection against losses caused by marine perils or perils of the sea. It is a contract of indemnity.
- Nature of Risks Protected: It covers losses incidental to sea voyages. The risks include collision of the ship with a rock, attack by enemies, fire, capture by pirates, and actions of the captain and crew. The insurance can cover:
- Hull Insurance: Protects against damage to the ship itself.
- Cargo Insurance: Protects the owner of the goods against their loss or damage during transit.
- Freight Insurance: Protects the shipping company from the loss of freight charges if the cargo is lost or damaged and does not reach its destination.
Other Types of Insurance (General Insurance):
- Health Insurance: Protects against the risk of high medical costs associated with illness and injuries. (e.g., Mediclaim policy).
- Motor Vehicle Insurance: Protects against the owner's liability to compensate people killed or injured by the vehicle and also covers damage to the vehicle itself.
- Burglary Insurance: Protects against the loss or damage of household goods and property due to theft, burglary, or house-breaking.
- Crop Insurance: Protects farmers against the financial loss from crop failure due to events like drought or flood.
Q5Long Answer Questions
Explain in detail the warehousing services.
Solution
Warehousing is the act of storing goods that will be sold or distributed later. Initially viewed as a static unit for keeping goods, modern warehouses have evolved into dynamic logistical service providers. They play a crucial role in the supply chain by making the right quantity of goods available at the right place, at the right time, and at the right cost. Warehousing services include various types of warehouses and a range of functions.
Types of Warehouses
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Private Warehouses: These are owned, operated, or leased by a company for handling its own goods. They offer better control and flexibility but require significant capital investment. They are common among large manufacturers and retail chains.
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Public Warehouses: These are owned by a business that provides storage facilities to the general public (traders, manufacturers) for a fee. They are licensed and regulated by the government. They are cost-effective for small businesses that cannot afford their own warehouse.
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Bonded Warehouses: These are licensed by the government to accept imported goods for storage before the payment of customs duty. This allows importers to store goods and pay duty in installments or re-export them without paying duty, thus facilitating entrepot trade.
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Government Warehouses: These are fully owned and managed by the government or public sector organizations like the Food Corporation of India (FCI) and Central Warehousing Corporation (CWC).
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Cooperative Warehouses: These are set up by marketing or agricultural cooperative societies to provide warehousing facilities to their members at economical rates.
Functions of Warehousing (Warehousing Services)
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Consolidation: The warehouse receives and consolidates materials and goods from different production plants and dispatches them as a single shipment to a particular customer, reducing transportation costs.
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Break the Bulk: The warehouse performs the function of dividing large bulk quantities of goods received from plants into smaller, more manageable quantities required by clients.
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Stock Piling: This involves the seasonal storage of goods. Goods or raw materials that are not needed immediately are stored and made available as per customer demand. This is common for agricultural products harvested seasonally but consumed year-round.
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Value Added Services: Modern warehouses provide services beyond mere storage, such as packaging, labelling, grading, and in-transit mixing of goods to meet the specific requirements of customers.
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Price Stabilisation: By adjusting the supply of goods to match the demand situation, warehousing helps in stabilising prices, preventing sharp fluctuations due to excess supply or scarcity.
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Financing: Warehouse owners may advance money to the owners of the goods on the security of the stored goods. A warehouse receipt can also be used as collateral to obtain loans from banks.
Q1Projects/Assignments
Identify a list of various services you use on a regular basis and identify their distinct characteristics.
Solution
Here is a list of services used on a regular basis and their distinct characteristics based on the 'Five Is':
1. Mobile/Telecom Service
- Intangibility: The network signal and the ability to communicate cannot be touched.
- Inconsistency: Network quality can vary based on location and time. Call centre service differs with each representative.
- Inseparability: The service (making a call) is produced and consumed simultaneously.
- Inventory (Less): Unused talk time or data for a specific period (e.g., a day) perishes and cannot be stored.
- Involvement: The user is actively involved by dialling a number and speaking.
2. Public Transport (e.g., City Bus)
- Intangibility: The journey or the act of being transported is an experience and cannot be physically owned.
- Inconsistency: The experience can differ each day due to traffic, crowds, or the driver's behaviour.
- Inseparability: The service of transportation is produced (the bus moving) and consumed (by the passenger) at the same time.
- Inventory (Less): An empty seat on a bus for a particular trip cannot be saved and sold later; the potential revenue is lost forever.
- Involvement: The passenger is involved by waiting at the bus stop, boarding, and paying the fare.
3. Restaurant Service
- Intangibility: The ambiance, the service from the waiter, and the overall dining experience are intangible.
- Inconsistency: The taste of the food and the level of service can vary from one visit to the next.
- Inseparability: The food is prepared (production) and eaten (consumption) in the same location, often simultaneously.
- Inventory (Less): A vacant table in a restaurant represents a service that perishes if not used.
- Involvement: The customer is highly involved in placing the order and can often customize their meal.
4. Banking Service
- Intangibility: Financial advice, fund transfers, and the security of deposits are intangible.
- Inconsistency: The advice given by two different bank employees might vary. The service experience at the counter differs from using an ATM.
- Inseparability: Many services, like depositing a cheque with a teller, require the customer's presence.
- Inventory (Less): A bank teller's idle time cannot be stored for a busier period.
- Involvement: The customer is actively involved in filling out forms, providing identification, and conducting transactions.
Q2Projects/Assignments
Do a project on banking services. Approach a nearby bank and collect information about various services offered by them and also collect leaflets about salient features of different schemes. Compile and suggest what extra services you may like to propose.
Solution
This is a project-based activity. A student can complete this by following the steps outlined below:
Project Title: An Overview of Services Offered by [Name of the Bank, e.g., State Bank of India]
Objective: To study the various banking services offered by a commercial bank and suggest potential new services.
Methodology:
- Visit a local branch of a commercial bank (e.g., HDFC Bank, Punjab National Bank).
- Request an appointment with the branch manager or a customer service executive.
- Collect informational leaflets, brochures, and forms for different services.
- Prepare a questionnaire based on the chapter content to ask the bank official.
Information to Collect:
- Types of Deposit Accounts: Ask about the features, interest rates, and minimum balance requirements for Savings, Current, Fixed, and Recurring Deposit accounts.
- Lending Services: Inquire about the types of loans offered (e.g., home loans, car loans, personal loans, business loans), their interest rates, and eligibility criteria.
- Fund Transfer Facilities: Gather information on NEFT, RTGS, IMPS, and bank drafts, including charges and transaction limits.
- e-Banking Services: Ask for a demonstration or leaflet about their internet banking portal and mobile banking app. Note down the features available (e.g., bill payment, online applications, statement download).
- Allied Services: Inquire about locker facilities, Demat accounts, insurance products, mutual funds, and credit/debit card offerings.
Compilation of Report:
- Introduction: Briefly introduce the bank and the purpose of the project.
- Deposit Services: Detail the features of each type of deposit account, using the collected leaflets.
- Loan Services: Describe the various loan products available.
- Digital Banking: Explain the e-banking and mobile banking facilities.
- Other Services: List and explain the allied services offered by the bank.
Suggestions for Extra Services:
Based on the study, the following services could be proposed:
- Financial Literacy Workshops: The bank could organize free workshops for students and senior citizens on topics like safe online banking, investment basics, and fraud prevention.
- Specialized Accounts for Gig Economy Workers: A customized savings account for freelancers and gig workers with features like flexible deposit options and integrated invoicing tools.
- Eco-Friendly Banking Options: Introduce 'Green Accounts' that fund environmental projects, along with offering paperless statements and biodegradable debit cards.
- Enhanced Mobile App Features: Suggest adding features like an in-app expense tracker, goal-based saving tools, and a chatbot for instant customer support.
Q3Projects/Assignments
Visit a nearby bank branch in your locality and collect information about various types of account available for customers to open as per their requirement.
In the second part of the activity match the information given in column A with the information given in Column B.
S. No. Column A Column B 1. Multiple Option Deposit It is a temporary pass through account held by a third party during the process of a transaction between two parties unless the transaction is completed. 2. Savings Account A kind of deposit scheme introduced by different banks, where the excess amount in the savings bank account is transferred to fixed deposit account and the account holder earns more rate of interest. If the bank receives a cheque for this account and the balance is not sufficient, the amount will be transferred from fixed deposit account to savings bank account to clear the cheque. In short, it gives the account holder the interest of a term deposit with the flexibility of partial withdrawal, whereas, the remaining cash will get better interest. 3. Current Account It is also called cumulative deposit scheme. Any resident, individual, association, club, institution/ agency is eligible to open this account in single/joint names. The account can be opened for any period ranging from 6 months to 120 months, in multiple of 1 month for monthly installment. The amount selected for installment at the start of the scheme is payable every month and the number of installments once fixed, cannot be changed. The rate of interest is compounded quarterly and the final amount is paid on maturity. 4. Fixed Deposit Account Any resident, individual, association, club, etc., is eligible for this account. It is a kind of modest credit option available to the depositor. Two free cheque books will be issued each year. Internet banking facility will be provided without any charge. Balance enquiry, NEFT, bill payment, mobile recharge, etc., are provided through mobile phones. Students can open this account with zero balance by providing the required documents. 5. Demat Account This account can be opened by any resident, individual, association, limited company, religious institution, educational institution, charitable institution, club, etc. Payments can be done unlimited number of times. Funds can be remitted from any part of the country to the corresponding account. Overdraft facility and Internet banking facility are available. 6. Escrow Account It is classified as short deposit receipt and fixed deposit receipt a. Short Deposit Receipt
(i)
Banks accept deposits from customers varying from 7 days to a maximum of 10 years.
(ii)
The period for 'short deposits' can vary from 7 days to 179 days.
(iii)
The minimum amount that can be deposited under this scheme is Rs. 5 lakh for a period of 7-14 days. b. Fixed Deposit Receipt
(i)
Any resident, individual, association, minor, society, club, etc., is eligible for this account.
(ii)
The minimum FDR in metro and Urban branches is Rs. 10,000 and in rural and semiurban and for senior citizens is Rs. 5000.
(iii)
Interest rate differs from bank to bank depending upon the tenure of the deposits and as bank changes the rate.
(iv)
Additional interest of 0.50% is offered to senior citizens on deposits placed for a year and above. | | 7. | Recurring Deposit Account | (i) This account offers stress-free transactions on the shares.
(ii)
An individual, Non-Resident Indian, foreign institutional investor, foreign national, corporate, trusts, clearing houses, financial institution, clearing member, mutual funds, banks and other depository account.
(iii)
For opening this account, an applicant requires to fill a form, submit his/her photo along with a photocopy of Voter ID/Passport / Aadhar Card/ Driving Licence and a Demat account number will be provided to the applicant immediately after the completion of processing of the application. |
Solution
The first part of the activity requires a visit to a bank branch, which is a practical task for the student.
The solution for the second part of the activity, which involves matching Column A with Column B, is as follows:
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1. Multiple Option Deposit matches with the description for S. No. 2 in Column B.
- Reason: This description explains how excess funds from a savings account are transferred to a fixed deposit to earn higher interest, which is the core feature of a multiple option deposit account.
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2. Savings Account matches with the description for S. No. 4 in Column B.
- Reason: This description mentions features typical of a basic savings account, such as being suitable for individuals, offering free cheque books, and having special provisions for students (zero balance).
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3. Current Account matches with the description for S. No. 5 in Column B.
- Reason: This description highlights features of a current account, such as unlimited payments, suitability for associations and companies, and the availability of an overdraft facility.
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4. Fixed Deposit Account matches with the description for S. No. 6 in Column B.
- Reason: This description details the characteristics of fixed and short-term deposits, including varying tenures (7 days to 10 years) and different interest rates.
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5. Demat Account matches with the description for S. No. 7 in Column B.
- Reason: This description clearly states that the account is for stress-free transactions in shares and requires documents like Voter ID/Aadhar for opening, which are characteristics of a Demat account.
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6. Escrow Account matches with the description for S. No. 1 in Column B.
- Reason: This description defines an escrow account as a temporary pass-through account held by a third party during a transaction.
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7. Recurring Deposit Account matches with the description for S. No. 3 in Column B.
- Reason: This description explains the cumulative deposit scheme where a fixed installment is paid every month for a specific period, which is the definition of a recurring deposit.
Q1Short Answer Questions
Define services and goods.
Solution
Services
According to the chapter, services are defined as those separately identifiable, essentially intangible activities that provide satisfaction of wants, and are not necessarily linked to the sale of a product or another service. Their purchase does not result in the ownership of anything physical. For example, seeking advice from a doctor is a service.
Goods
A good is defined as a physical product capable of being delivered to a purchaser, which involves the transfer of ownership from the seller to the customer. Goods are tangible items involved in trade or commerce, such as commodities or products. For example, purchasing medicine from a store is purchasing a good.
Q2Short Answer Questions
What is e-banking. What are the advantages of e-banking?
Solution
e-Banking
e-Banking, or electronic banking, is a service provided by banks that allows a customer to conduct banking transactions over the internet using a personal computer, mobile telephone, or other handheld device. It involves using electronic media to access banking services without the need for a human operator, through a bank's web-enabled centralised database.
Advantages of e-Banking
For Customers:
- 24/7 Availability: It provides 24 hours, 365 days a year services to customers.
- Convenience: Customers can perform transactions from their office, home, or while travelling.
- Financial Discipline: It helps inculcate financial discipline by recording every transaction.
- Customer Satisfaction: It offers unlimited access to the bank, which leads to greater customer satisfaction.
- Security: It provides greater security as customers can avoid travelling with cash.
For Banks:
- Competitive Advantage: e-banking provides a competitive edge to the bank in the market.
- Unlimited Network: The bank's network is not limited by the number of branches and can be accessed from any PC with an internet connection.
- Reduced Workload: It considerably reduces the load on branches by centralising the database and taking over some accounting functions.
Q3Short Answer Questions
Write a note on various telecom services available for enhancing business.
Solution
Telecom services are the backbone of every business activity, enabling communication with suppliers, customers, and competitors. Various telecom services available for enhancing business are:
- Cellular Mobile Services: These include all types of mobile telecom services for voice and non-voice messages, data services, and PCO services. They allow businesses to stay connected on the move.
- Fixed Line Services: These services provide voice and non-voice messaging and data transmission through a network of fiber optic cables. They are crucial for establishing reliable long-distance communication links for offices.
- Cable Services: Traditionally used for one-way entertainment services, these are evolving to provide two-way communication, including voice and data services, which can be used by businesses for media and information services.
- VSAT (Very Small Aperture Terminal) Services: This is a satellite-based communication service that offers a highly reliable solution for businesses in both urban and rural areas. It is useful for applications like online market rates, tele-education, and connecting remote offices.
- DTH (Direct to Home) Services: This is a satellite-based media service that provides a bouquet of channels directly to the user. While primarily for entertainment, it can be used by businesses in the media and hospitality sectors.
Q4Short Answer Questions
Explain briefly the principles of insurance with suitable examples.
Solution
The principles of insurance are the fundamental rules that govern an insurance contract. The key principles are:
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Utmost Good Faith: Both the insurer and the insured must disclose all material facts accurately and fully. For example, a person taking a life insurance policy must disclose their smoking habits and any pre-existing medical conditions.
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Insurable Interest: The insured must have a pecuniary (financial) interest in the subject matter of the insurance. They must suffer a financial loss if the insured event occurs. For example, a person has an insurable interest in their own house and car, but not in their neighbour's house.
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Indemnity: This principle applies to general insurance (like fire and marine) and states that the insured can only be compensated for the actual amount of loss, not to make a profit. For example, if a property insured for ₹4,00,000 suffers a loss of ₹3,00,000, the insurer will only pay ₹3,00,000.
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Proximate Cause: The insurer is liable to pay for a loss only if the most direct, dominant, and effective cause of the loss (the proximate cause) is a peril covered by the policy. For example, if goods are damaged by water used to extinguish a fire, the fire is the proximate cause, and the loss is covered under a fire policy.
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Subrogation: After the insurer has compensated the insured for the loss, the insurer gains the right to stand in the place of the insured to recover the loss from any third party responsible for it. For example, if a car is damaged by a negligent driver, after the insurance company pays for the repairs, it can sue the negligent driver to recover the amount.
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Contribution: If the same subject matter is insured with more than one insurer, all insurers will contribute to the loss in proportion to the amount assured by each. For example, if a property worth ₹5,00,000 is insured with Company A for ₹3,00,000 and Company B for ₹2,00,000, in case of a loss of ₹1,00,000, A will pay ₹60,000 and B will pay ₹40,000.
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Mitigation: The insured has a duty to take all reasonable steps to minimise the loss or damage to the insured property. For example, if a fire breaks out in a warehouse, the owner must try to save the goods and not just let them burn because they are insured.
Q5Short Answer Questions
Explain warehousing and its functions.
Solution
Warehousing refers to the process of storing goods in a scientific and systematic manner to maintain their original quality, value, and usefulness. Modern warehousing has evolved from being just a static storage unit to a key logistical service that ensures the right quantity of goods is available at the right place, at the right time, and at the right cost.
Functions of Warehousing:
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Consolidation: The warehouse receives goods and materials from different production plants and consolidates them into a single transportation shipment for a particular customer.
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Break the Bulk: The warehouse divides large quantities of goods received from production plants into smaller quantities, which are then transported to different clients according to their specific requirements.
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Stock Piling: Warehouses store goods or raw materials that are produced seasonally but consumed throughout the year (e.g., agricultural products) or are not required immediately for sale or manufacturing. This ensures a steady supply to the market.
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Value Added Services: Warehouses provide services like in-transit mixing, packaging, and labelling. They may also perform grading of goods and dividing them into smaller lots as per customer needs.
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Price Stabilisation: By holding back the supply of goods when demand is low and releasing them when demand is high, warehousing helps in stabilising prices in the market.
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Financing: Warehouse owners can advance money to the owners of the goods against the security of the stored goods. They may also supply goods on credit to customers.