1.2 Risk And Reward

Question 1

Name 3 risks when starting up a business:

Answer 1

• Business failure
• Financial loss
• Lack of security

Question 2

Give two reasons for a business failure:

Answer 2

• Problems with cash-flow

- An unexpected drop in sales revenue

Question 3

What is cash-flow?

Answer 3

The amount of money coming in and going out of the business and the timing of this movement.

Question 4

What is sales revenue?

Answer 4

The amount of money that comes in from a business’s sales.

Question 5

Name 2 problems of financial risks:

Answer 5

• An entrepreneur can lose the money they invested into their start-up.
• Can damage their reputation and can have an impact on being able to raise finance for future start-ups.

Question 6

Name and describe 3 risks that can lead to a financial loss:

Answer 6

Competitive risk - a business’s competitor might to better that the business.
Technical risk - a product might not works as intended.
Financial risk - a business does not have the right amount of investment.

Question 7

Name 3 ways in which lack of security can impact an entrepreneur:

Answer 7

• Don’t have a fixed wage.
• Financial insecurity - lose the money invested in the startup (borrowed or their savings)
• Health - can cause stress

Question 8

Name 3 rewards that motivate entrepreneurs:

Answer 8

• Business success - satisfaction of building a business from nothing.
• Profit
• Independence - motivated by working for themselves.