Q.Discuss the arguments for and against business accepting social responsibility.

(a) Arguments against social responsibility: profit is the sole aim, it raises costs and burdens consumers, businessmen lack social skills, it dilutes business purpose, and law/government already handles welfare. (b) Factoring means selling receivables to a factor who provides immediate finance, collects debts, works with/without recourse and maintains the sales ledger.

(a) Arguments against Social Responsibility (TN HSC Class-11 Commerce syllabus):

1. Profit maximisation is the only objective — the basic purpose of business is to earn profit for its owners; spending on social activities goes against this aim.
2. Increases cost and burdens consumers — money spent on social responsibility raises the cost of production, which is ultimately passed on to consumers as higher prices.
3. Lack of social skills — businessmen are trained to run a business, not to solve complex social problems, so they may not be competent to handle them; such work is better left to specialised social agencies.
4. Dilution of business purpose — involvement in social activities diverts the attention, time and resources of management away from the main business, reducing efficiency.
5. Already the responsibility of government/law — social welfare is mainly the duty of the government, and there are already laws that force businesses to behave responsibly, so extra social responsibility is unnecessary.

(b) Features of Factoring

Factoring is a financial service in which a firm sells its receivables to a specialised agency called a factor. Its features are:

1. Sale of trade receivables (debts) — the client sells its book debts/receivables to the factor.

2. Immediate finance — the factor pays a large part of the invoice value at once (usually about 80-90%), giving the firm ready working capital, and pays the balance after collection (less charges).

3. Collection of debts — the factor takes over the responsibility of collecting the amounts due from the customers.

4. With or without recourse — factoring may be with recourse (the client bears the loss of bad debts) or without recourse (the factor bears the loss of bad debts).

5. Sales-ledger administration — the factor also maintains the sales ledger and accounts relating to the receivables and provides information/advice to the client.