Theme 1.1.2 - Risk and Reward. Flashcards
(10 cards)
What is business risk?
The possibility of a business failing or losing money
What is financial loss?
When a business earns less money than it spends, leading to a loss
Name three potential rewards of starting a business
Business success, profit, independence
Name three risks an entrepreneur might face
Business failure, financial loss, and lack of security
How can a business reduce risks?
By conducting market research, having a strong business plan, and managing finances carefully
How does competition increase risk?
Competitors may take customers or force prices down
How can personal savings be a risk in business?
If the business fails, the entrepreneur could lose their own money
How can loans increase business risk?
The business must repay the loan with interest even if it fails
Why is it important to balance risk and reward?
To make informed decisions that avoid unnecessary failure
Why is a business plan useful for reducing risk?
It helps organise ideas, plan finances, and identify problems early
