Very Short & Long Type Questions - Enterprise Marketing, Entrepreneurship, Class 12 | Additional Study Material for Commerce PDF Download

Very Short Answer Type Question:
Q1. When do we conclude that a business has failed ? (TBQ) (1 mark)
Ans. When a profitable business fails to generate adequate cash flows to meet expenses.

Long Answer Type Question:
Q1. Explain the reasons for business failure. (6 marks)
Ans.
(i) Lack of industry experience : It leads to poor organization of a firm and its resources.
(ii) Inadequate financing : Many businesses fail due to lack of proper financing channels.
(iii) Lack of adequate cashflow : Many small business fail because owners have a difficult time projecting what cash will come in every month and how much can go out.
(iv) Poor Business Planning : A good business plan helps identify the mission, cost structure, market, external influences and strengths and weaknesses of a business.
(v) Management incompetence : Good management efficiently implements and monitors the strategic and operational plan of a business.
(vi) Ignoring the competition : If competitors offer better products, services or prices, the customers will go to buy their products.
(vii) Unworkable goals : Setting realistic goals, within the bounds of acceptable risk taking and optimism is important.
(viii) Diminished customer base : Diversifying the customer base is an important factor in building the business.
(ix) Uncontrolled growth : Proper planning must be in place for business growth. Successful growth requires a professional management team, flexible organization and proper systems and controls.
(x) Inappropriate location : Location may be critically important for big as well as small businesses.
(xi) Poor system of control : A firm cannot control the external factors affecting its environment. A lack of proper control on internal activities can lead to business failure. Controls can be set in place to measure the quality and quantity of production.
(xii) Lack of entrepreneurial skills : A firm’s performance outcome is a function of many variables including individal owner characteristics, owner behaviour and environmental influences. Thus, the personal and personality characteristics of an owner can be the cause of business failure.