2.3.3

Question 1

What are liquidity problems for a business to go into failure?

Answer 1

A business fails due to not having the sufficient cash reserves to continue operating

Possibly can not afford raw materials.
Possibly can not pay staff.

Question 2

What are (4) Reasons a business goes into failure that are internal?

Answer 2

Cash-Flow problems (Flawed product and pricing mistake)
Financial Problems (Cash flow management or budgeting)
Poor Planning (Ineffective business plan)
Lack of Leadership (lack of skills to run a business)

Question 3

What are (4) Reasons a business goes into failure that are external?

Answer 3

Economic Conditions ( Rise in interest rates )

Legal Factors ( Legislation Change )

Entry of competition increase

Technological Change