Why Some (new Or Established) Businesses Fail:
Overview
Starting a business is exciting, but the figures are sobering: in some countries more than half of all new businesses close within five years. Even long-established firms can disappear when they run out of cash or fail to keep up with change. Understanding why businesses fail is one of the most practical things you can learn, because the same lessons show owners how to survive.
In this lesson you will work through the main causes of business failure, from poor management and cash shortages to changes in the business environment, and then see clearly why brand-new businesses carry the greatest risk of all. By the end you should be able to diagnose why a business in a case study is struggling and suggest how it could reduce the danger.
Objectives
- Causes of business failure, e.g. lack of management skills, changes in the business environment, liquidity problems
- Why new businesses are at a greater risk of failing
Lesson Note
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Lesson Evaluation
Congratulations on completing the lesson on Why Some (new Or Established) Businesses Fail:. Now that youve explored the key concepts and ideas, its time to put your knowledge to the test. This section offers a variety of practice questions designed to reinforce your understanding and help you gauge your grasp of the material.
You will encounter a mix of question types, including multiple-choice questions, short answer questions, and essay questions. Each question is thoughtfully crafted to assess different aspects of your knowledge and critical thinking skills.
Use this evaluation section as an opportunity to reinforce your understanding of the topic and to identify any areas where you may need additional study. Don't be discouraged by any challenges you encounter; instead, view them as opportunities for growth and improvement.
- Which of these is a liquidity problem? A. the business makes a small profit B. the business cannot pay its suppliers because it has no cash C. the business has too many customers D. the business owns a new factory Answer: B
- New businesses are at greater risk of failing mainly because they: A. always sell luxury goods B. lack experience, finance and a track record C. pay no taxes D. have too many managers Answer: B
- A firm grows too quickly, cannot manage all its new branches and collapses. This is failure through: A. privatisation B. over-expansion C. market research D. delegation Answer: B
- Which is most likely to cause an established business to fail? A. keeping good records B. a major change in technology it ignores C. training its staff D. forecasting cash flow Answer: B
- A profitable business runs out of cash to pay wages. The immediate cause of failure is: A. high profit B. lack of liquidity C. low taxes D. strong demand Answer: B
Available on the Green Bridge App
Download the Green Bridge CBT app on your phone or computer to access full lesson notes, practice questions, and more.
Available on the Green Bridge App
Download the Green Bridge CBT app on your phone or computer to access full lesson notes, practice questions, and more.
Recommended Books
Practice Mock Questions
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