Question

Explain any two business activities which are auxiliaries to trade.

Answer 1

Auxiliaries to trade include trade-related activities which facilitate the exchange of goods and services. Among the major auxiliaries to trade, a few are transportation, advertisement, packaging, warehousing, banking and communication. The following are two business activities which are auxiliaries to trade.

(a) Banking and finance: Finance is the most important input to run any business. Purchasing raw materials and meeting day-to-day expenses demand finance. Besides the availability of the right amount of funds, their easy and cheap availability is also equally important. In today’s world, where a majority of trading activities are conducted on credit, the need for finance is immense. This is because, as goods are sold on credit, the funds that are invested are not realised until the sale proceeds are ultimately received by the producer or the trader. Thus, the absence of a banking and finance system can obstruct the free movement of goods. In these contexts, an efficient banking facility ensures the easy and ready availability of cheap credit to businessmen and traders, and thus acts as an auxiliary to trade.

(b) Advertising: We all know the importance of advertisement in today’s world. It is through advertisements that businesspersons are able to reach a large number of potential buyers. Advertisements through television, the Internet, newspapers, the radio and various other media educate the buyers and make them more aware of the goods on sale. Advertising helps businesspersons to increase their sales and hence plays the role of an auxiliary to trade.