Topic 36: Business Failures

Question 1

Types of business failure

Answer 1

1. Internal
2. External
3. Financial
4. Non-financial

Question 2

Internal causes of failure

Answer 2

1. Lack of planning
2. Cash-flow problems: Overtrading, Investing in fixed assets excessively, Allowing too much credit, Over-borrowing, Seasonal factors and unforeseen expenditure, poor financial management
3. Lack of funds
4. Relying on a narrow customer base
5. Marketing problems
6. Failure to innovate
7. Lack of business skills
8. Poor leadership

Question 3

External causes of business failure

Answer 3

1. Competition
2. Changes in legislation
3. Changes in consumer
4. Economic conditions
5. Changes in market prices