Lesson 007 - Types of Businesses According to Activities (Service, Merchandising, Manufacturing)

Summary

This video lesson explains the three types of businesses based on their activities: service, merchandising, and manufacturing. It provides clear examples of each type, such as barber shops for service businesses, grocery stores for merchandising, and car manufacturers for manufacturing. The video also discusses how these businesses generate income, with practical problems illustrating income calculation. Additionally, it explores the integration of these business types, showing how they can work together in real-world scenarios, like a music production company or essential oils manufacturer.

Takeaways

• 😀 The lesson distinguishes between three types of businesses based on their activities: service, merchandising, and manufacturing companies.
• 💼 Service businesses generate income by providing services for a fee, such as barber shops, spas, travel agencies, IT solutions firms, and accounting services.
• 🛍️ Merchandising businesses involve the buying and selling of goods, with grocery stores and fashion boutiques being prime examples.
• 🏭 Manufacturing companies purchase raw materials and transform them into finished goods, like ice cream or cars, through a production process.
• 🔄 It's possible for businesses to combine these activities; for example, a music production company may offer concerts (service), sell CDs (merchandising), and produce albums (manufacturing).
• 🌟 The integration of these business types can create a system where a manufacturer supplies a product to a service business, which then uses it to provide a service to customers.
• 📊 Service businesses measure income using the income statement formula: revenue minus expenses equals net income.
• 📉 Merchandising and manufacturing businesses calculate net income by matching sales revenue with the cost of goods sold and then subtracting operating expenses.
• 🔢 In the given examples, a barbershop's net income is calculated by subtracting salaries, utilities, and rent from service revenue.
• 🛒 A grocery store's net income is found by deducting the cost of goods sold, salaries, utilities, and rent from sales revenue.
• 🏗️ A car manufacturing company's net income involves subtracting materials, labor, overhead, salaries, utilities, and rent from sales revenue.
• 📝 The lesson emphasizes the importance of understanding the different types of business activities and how they measure income.

Q & A

What are the three types of businesses according to activities mentioned in the script?

The three types of businesses according to activities are service companies, merchandising companies, and manufacturing companies.

How does a service business generate income?

A service business generates income by providing services for a fee. Customers pay for the services rendered after they have been provided.

Can you give an example of a service business mentioned in the script?

Examples of service businesses include a barber shop, a salon, massage therapies or spas, a travel tourist agency, IT solutions firms, legal services, and accounting services.

What is the main difference between a merchandising business and a service business?

The main difference is that a merchandising business involves buying and selling goods, whereas a service business provides services for a fee without necessarily dealing with goods.

How does a merchandising business operate?

A merchandising business operates by purchasing goods from suppliers and then selling these goods to customers, making a profit from the difference between the purchase and selling prices.

What is a manufacturing business and how does it differ from a merchandising business?

A manufacturing business purchases raw materials and processes them into finished goods to be sold to customers. Unlike merchandising, manufacturing involves a transformation process of the goods before selling them.

Can a single company engage in all three types of business activities?

Yes, a single company can engage in all three types of business activities. The script provides an example of a music production and recording company that organizes concerts (service), operates a record bar (merchandising), and produces CD albums (manufacturing).

How is net income calculated for a service business?

Net income for a service business is calculated by subtracting operating expenses from service revenue, which is the income generated from providing services.

What is the formula for calculating net income in merchandising and manufacturing businesses?

The formula for calculating net income in merchandising and manufacturing businesses is to subtract the cost of goods sold and operating expenses from sales revenue.

What is considered as an example of a service business in the script?

Accounting firms are considered as an example of a service business in the script, as they provide various accounting services to clients.

How does the script illustrate the integration of the three types of business activities?

The script illustrates integration by describing a scenario where an essential oils manufacturer sells to groceries (merchandising), which then sells to customers, and a massage spa purchases these oils for their services (service business), showing how the activities can work together in a system.