Business Failure

Question 1

What is meant by internal factors?

Answer 1

Factors that a business are able to control causing collapse

Question 2

What is meant by external factors?

Answer 2

Factors beyond control of businesses causing collapse

Question 3

What are the internal factors causing collapse of a business?

Answer 3

1.poor planning
2.cash flow
3.marketing
4.lack of skills

Question 4

What are the external factors causing collapse of a business?

Answer 4

1.Competition
2.Legislation
3.market conditions
4. Economic conditions/variables
5.Changes in consumer tastes

Question 5

What are the causes of cash flow problems?

Answer 5

1.Overtrading
2.Allowing too much credit to customers
3.over borrowing
4.external factors eg season, legislation
5.Poor cash flow management

Question 6

Why is poor planning a factor ? (internal)

Answer 6

-needed to prove a clear vision of the future
-owners can take an objective view
-help to identify potential problems
-financial planning is crucial so weak cash flow can be overcome

Question 7

What is meant by overtrading?

Answer 7

when a business attempts to fund large volume of production with inadequate cash

Question 8

What is meant by overborrowing?

Answer 8

• lots of loans= high interest rates=bad long term
  -threatening overall control of the business

Question 9

Why is lack of business skills a factor (internal)?

Answer 9

-not having entrepreneurial skills and charactoristics

Question 10

Why is marketing problems a factor (internal)?

Answer 10

(mistakes made on all 5Ps)
-failure to meet consumer needs with poor products
-poor pricing strat
-investing heavily in bad promotion decisions

Question 11

Why is competition a factor (external)

Answer 11

-rivals bringing out superior products
-charge lower prices bc costs lower
-use destroyer pricing strat if powerful

Question 12

Why is legislation a factor (external)

Answer 12

laws that affect the business negatively eg banning, taxes

Question 13

Why is market conditions a factor (external)

Answer 13

Some business have little control over pricing. Certain industries there are firms that are price takers

Question 14

Why is economic conditions a factor?

Answer 14

-business cycle eg growth or recession
-interest rates
-inflation
-exchange rates
-unemployment

Question 15

What are the financial factors?

Answer 15

-cash flow
-economic conditions
-lack of funds

Question 16

what are some non financial factors?

Answer 16

-planning
-lack of skills
-competition
-changes in consumer tastes