Topic 1.1.2 Risk and Reward Flashcards
What are the risks when starting a business?
Business failure-This is because a business may not have sufficient finances to meet their debts.As a result,this leads to negative cash flow of the business which may lead to the business shutting down and business failure.Lack of security-entrepreneur may lose all their personal savings or assets when starting a business because they don’t have a guaranteed regular income.As a result entrepreneur may lose out on all their own money.
Financial loss-This is because an entrepreneur could risk losing any capital investment they have put in the investment .As a result,it may make it hard to recover or improve the business since all the money from the capital investment is gone leading to business failure.
What are the rewards when starting a business?
Business success-This can give the entrepreneur more income.As a result,increase self satisfaction for entrepreneur.
Profit-This can be used to reinvest into the business and improve products.As a result,by improving your products the business can cater more to customer needs and attract more customers.
What are the non-financial rewards when starting a business?
Independence-This means that you have the freedom to make your own decisions in the business,less risk because entrepreneur themselves is responsible for the business.
Environmental goals-A business aim would want to make a more cleaner and safer area with less pollution.As a result improves the reputation of the business and attract more customers who want to contribute to a more safer environment and buy from a business with good ethics.
Self satisfaction-Entrepreneur feels more happy that they have their own business that is doing well due to their own decisions a result,improves motivation of the entrepreneur and could lead to better productivity of the business.
