2.3.3 business failure

Question 1

what is business failure

Answer 1

• when a business does not have enough money to cover their costs
• usually occurs when the business doesn’t have enough cash to cover current liabilities

Question 2

what are the non-financial internal factors that cause business failure

Answer 2

• poor leaderhsip
• poor market research
• ineffective marketing

Question 3

what are the financial external factors that lead to business failure

Answer 3

• bad management of working capital and cash flow
• poor efficiency, costs are high
• lack of finance

Question 4

what are the non-financial external factors that cause a business to fail

Answer 4

• actions of competitors can cut into revenue
• consumer trends
• poor communication with suppliers
• technological change
• legal changes

Question 5

what are the financial external factors for business failure

Answer 5

• economic challenges, recessions
• exchange rates

Question 6

some factors that cause business failure are more important for different businesses, give examples

Answer 6

• a firm operating in a dynamic market NEEDS innovation to maintain sales
• firms that sell price and income-elastic products will be heavily impacted by economic changes
• large businesses are more likely to suffer from communication problems