Business Failure Essay

1200 words - 5 pages

1. List and define the two forms of business failure.
Insolvency – occurs when a business closes itself down due to inability to meet financial commitments and sells its business assets to pay debts.
Bankruptcy – a legal process imposed by the courts that occurs when a business closes its doors because it will not or cannot pay its debts.
2. Identify the six basic categories of resources used to produce goods and services.
Cash and funds – money readily available to buy other resources.
Working capital – the amount of cash reserves (liquidity) a business holds to meet short-term debts
People/labour – workers in the business
Capital assets – tangible property that cannot easily ...view middle of the document...

4. Distinguish and explain the difference between business effectiveness and efficiency.
Effectiveness is the level of results from the actions of managers and managers. The effectiveness of a workforce has a significant impact on the quality of a company’s product or service, which often dictates a company’s reputation and customer satisfaction. Employees and managers who demonstrate effectiveness in the workplace help produce high-quality results.
Efficiency in the workplace is the time it takes to do a task. Efficient employees and managers complete tasks in the least amount of time possible with the least amount of resources possible using their time efficiently. Efficiency increases productivity and saves both time and money.
5. Explain the importance of objective-setting for small business. Use an example to illustrate your explanation.
Every small businesses should have goals that are part of their business plan as they are very important for business success. They can be what the company wishes to achieve in terms of market share, growth and profitability. They can also be inside the business goals such as increasing staff or boosting employee morale.
For example, if a business wishes to gain an extra 25% profit in comparison to their previous year, the goal may motivate the workers to work harder to achieve the company’s objective.
6. For each of the following examples of small business, list 3 financial and 3 non-financial KPIs that might be used as measures of business success. Justify your responses.
b) A childcare center
Financial:
* Profit – to see if the childcare center is earning enough money after expenses
* Gearing – how much of the childcare is still being paid off or currently being borrowed.
* Cash flow – to see if money is flowing through the business and if customer base is growing
Non-financial:
* Level of social responsibility – their involvement in the community, with parents
* Benchmarking – in comparison to other childcare centers, is their quality of service good?
* Staff satisfaction – is there a high staff morale?

b) A childcare center
Financial:
* Profit – to see if the childcare center is earning enough money after expenses
* Gearing – how much of the childcare is still being paid off or currently being borrowed.
* Cash flow – to see if money is flowing through the business and if customer base is growing
Non-financial:
* Level of social responsibility – their involvement in the community, with parents
* Benchmarking – in comparison to other childcare centers, is their quality of service good?
* Staff satisfaction – is there a high staff morale?

a) A butcher in a suburban shopping strip
Financial:
* Profit – to see if the butcher shop is generating enough money
* Market Share – to see how their sales compare with
Other butchers in the shopping strip
* Cash flow – to...

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