reasons for business failure Flashcards
how does overtrading lead to business failure
overtrading occurs when a business accepts more orders than it can produce, leading to an inability to meet production demands and a loss of cash flow
how does investing too much in non-current assets lead to business failure
investing too much in non-current assets can drain cash reserves, especially if it would be cheaper to lease the assets instead
how does allowing too much credit lead to business failure
allowing too much credit to customers can result in many irrecoverable debts, putting the business’s cash flow at risk
how do unexpected expenditures lead to business failure
unexpected costs, like sudden taxes or legal fees, can put strain on a business’s finances and lead to failure if not managed
how does poor financial management contribute to business failure
poor financial management, such as overspending or ineffective budgeting, can lead to cash flow issues and business failure
how does overborrowing lead to business failure
overborrowing can lead to high-interest payments and financial strain, increasing costs and potentially reducing profits
how do seasonal factors contribute to business failure
businesses that rely on seasonal sales may experience lower revenues during off-seasons, causing cash flow problems
how does being uncompetitive lead to business failure
uncompetitive businesses may struggle to attract customers due to poor pricing, inferior products, or a lack of differentiation from rivals
how does lack of finance lead to business failure
businesses that underestimate the importance of cash may run out of funds and be unable to cover operating costs, leading to failure
how do external factors lead to business failure
changes in consumer tastes, demand patterns, or economic conditions are beyond a business’s control and may lead to insufficient cash flow
how do new entrants contribute to business failure
new entrants may struggle to compete against established businesses with superior products or aggressive pricing, leading to failure
how does ineffective cost control lead to business failure
ineffective cost control, like overspending or not exploiting economies of scale, can reduce profits and lead to failure
how does failure to innovate lead to business failure
businesses that fail to innovate or keep up with technological advancements risk losing customers and revenue, leading to failure
how does poor leadership contribute to business failure
poor leadership, including a lack of motivation or knowledge, can result in mismanagement and ultimately business failure
how does ineffective marketing lead to business failure
ineffective marketing, such as targeting the wrong audience or using poor pricing strategies, can fail to generate enough sales, leading to business failure
