risk and rewards

Question 1

risk

Answer 1

business failure, financial loss, lack of security

Question 2

reward

Answer 2

business success, profit, independence

Question 3

Business
failure

Answer 3

If a business fails to plan for the
future it may risk losing out to
competitors

Question 4

clear strategy

Answer 4

A business must have a clear
strategy and plan if it is to
survive in a today’s dynamic
business world

Question 5

What is the chance of failure in
a new start-up?

Answer 5

20% of small businesses fail in their
first year
30% of small business fail in their
second year
50% of small businesses fail after five
years in business
70% of small business owners fail in
their 10th year in business.

Question 6

Financial risks

Answer 6

Starting a business can be a
financial risk for the owner
The owner may put their own
cash and other assets (e.g. a
van) into a business
If the business is sole trader or
partnership then they have
“unlimited liability” which
means they could lose their
personal assets to pay the
business debts

Question 7

Lack of security

Answer 7

If an entrepreneur has a
regular job, and they decide
to leave that job to open
their own business this is a
huge risk

Question 8

business success

Answer 8

The rewards of a good
business is success

Question 9

Keep all the profit

Answer 9

Profit = Total revenue – Total
costs
A reward of setting up your own
business is you get to keep all
the profit that the business
makes

Question 10

Independence

Answer 10

A reward of setting up your own business is that you could be your
own boss
Being your own boss means you get to make the major decisions in
the business

Question 11

Risky business

Answer 11

Homebase
Woolworths
BHS
Staples
toys R Us

Question 12

Purpose – to produce goods
and services

Answer 12

Land – somewhere to produce the goods e.g. a farm
Labour – people to work in the business e.g. farm
workers
Capital – money to get the business started
Enterprise – This is the drive or motivation from the
owners to start a business

Question 13

Purpose – to add value

Answer 13

Added value – the difference between what a business pays
its suppliers, and the price it is able to charge for its product
or service

Question 14

enterprise

Answer 14

Enterprise is about
taking risks, being
creative and innovative
and using your initiative

Question 15

An entrepreneur – organises
resources

Answer 15

An entrepreneur
develops a business
idea and then hires and
organises the factors of
production to carry out
the business activity

Question 16

An entrepreneur – takes risks

Answer 16

Risk taking – Setting up a
business is risky, money has
to be paid out in advance to
buy materials, equipment
and wages