2.3.3 BUSINESS FAILURE

Question 1

internal causes of business failure

Answer 1

• lack of planning
• cash flow problems
• lack of funds
• relying on narrow customer base
• marketing problems
• failure to innovate
• lack of business skills
• poor leadership

Question 2

external causes of business failure

Answer 2

• competition
• changes in legislation
• changes in consumer taste
• economic conditions
• changes in market prices

Question 3

cash flow problems leading to business failure

Answer 3

• overtrading
• investing too much in fixed assets
• allowing too much credit
• over borrowing
• seasonal factors
  -unforeseen expenditure
  -external factors
• poor management

Question 4

financial reasons for business failure

Answer 4

• bankruptcy
• insolvent
• shortage of cash

Question 5

non financial reasons for business failure

Answer 5

• lack of planning
• lack of business skills
• competing inefficiency