2.3.3 Business failure

Question 1

business failure definition

Answer 1

when business ceases to trade or when business doesn’t trade in a profitable way or whan a buisness makes a terrible desicion
(get help through buisness administartion, Liquidate - sell off assets to pay dabt)

Question 2

liquidation def

Answer 2

process of closing ltsd or PLC, sale of assets and company is dissolved (maybe sell brand name, stock, stores and continue to trade under diffrent management company)

Question 3

internal causes od business failure

Answer 3

poor efficiency
poor marketing
failure to innovate
bad management of working capital

Question 4

external causes of business failure

Answer 4

economic recession
strong pound (reduced export demand)

Question 5

internal causes of filure how

Answer 5

✅ Poor efficiency ➔ higher costs ➔ lower profit margins ➔ can’t compete ➔ business fails.

✅ Poor marketing ➔ customers don’t know or want the product ➔ low sales ➔ no revenue ➔ business fails.

✅ Failure to innovate ➔ products become outdated ➔ lose customers to better competitors ➔ falling sales ➔ business fails.

✅ Bad management of working capital ➔ can’t pay suppliers or staff ➔ cash flow crisis ➔ business runs out of money ➔ business fails.

Question 6

external causes of failure how

Answer 6

✅ Economic recession ➔ customers have less money ➔ fall in demand for products ➔ lower sales ➔ lower revenue ➔ business fails.

✅ Strong pound ➔ UK exports become more expensive abroad ➔ foreign customers buy less ➔ lower international sales ➔ business fails (especially for exporters).