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.
Because starting new business is expensive andrequires from someones posessions.As aresult,were the business to fail,the entrepreneur wouldlose money.
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.
