2.3 - Business Failure


2.3.3 Business Failure - Revision Notes

Financial Reasons:

  • Poor cash flow management 
  • Lack of funds to pay tax
  • Borrowing from expensive sources of finance (such as credit cards

Poor Working Capital Managment - Internal

  • This is critical if a business is to survive
  • Working capital performance is a measure of effiecieny that compares a business' liabilities to it's assets. 
  • Inablity to manage cash-flow is the most common reason that business' fail, this is because businesses then don't have enough money to pay their bills. 

Poor Marketing - Internal 

  • Poor marketing is a main reason to why business' can fail. 
  • If customers are lied to by a company it can give that business a very bad brand image.

Failure to Innovate - Internal

  • Most dynamic businesses have to keep up with the constantly changing market, if they don't, they can risk becoming outdated and therefore lose customers to no inovation.
  • If a business innovates products in the wring way, then it can cause a business to lose customers to close competitiors.
  • Kodak is an example of whom failed to innovate their cameras


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