Business Failure

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  • Created by: natlorenc
  • Created on: 20-10-16 17:23
Why is there high risks associated with starting a business?
Difficult to test the model without trading, there is also a high rate of business failure for start ups, Its easy to be overoptimistic in the business plan, competitor response is often aggresive
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Reason why business fails?
1No demand for idea(poor market research/unrealistic plan) 2Good idea but badly executed(wrong people;poor managment, overtrading.failure to manage cash flow 3External Shocks e.g. economic/social/legal change
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Why do established businesses fail?
1- Financial Reasons and 2-Non financial reasons
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What are the financial reasons of why established businesses fail?
Poor management of cash flow, inadequate or inappropriate financing
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What are the non - financial reasons of why established businesses fail?
Lack of management control, Significant external shock
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Poor management of cash flow include stuff like?
increase in stock levels, not appropraite credit control, bad debts incurred, poor accounting practices -late invoicing, inaccurate forecasting by management, failure to plan for capital/expenditure
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Inappropriate financing include stuff like?
using short- term overdtaft for long term investment, failure to use debt factoring when sales increasing
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Lack of management control include stuff like?
failure to develop credible business plan/understand costs, markets,key customers/administer company properly and excessive marketing expenditure
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Significant external shocks include stuff like?
loss of important.major customer, sudden decline in market demand, change in legislation that impact demand or increase costs
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Other cards in this set

Card 2

Front

Reason why business fails?

Back

1No demand for idea(poor market research/unrealistic plan) 2Good idea but badly executed(wrong people;poor managment, overtrading.failure to manage cash flow 3External Shocks e.g. economic/social/legal change

Card 3

Front

Why do established businesses fail?

Back

Preview of the front of card 3

Card 4

Front

What are the financial reasons of why established businesses fail?

Back

Preview of the front of card 4

Card 5

Front

What are the non - financial reasons of why established businesses fail?

Back

Preview of the front of card 5
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