Q.6:- Explain the concept of business risk and its causes.
Business risk is the possibility of failing to earn sufficient profits or incurring losses as a result of various unforeseen circumstances which are beyond the control of a business. For example, demand for a particular product may decline due to change in tastes and preferences of consumers or due to increased competition from other producers.
Human causes: Human causes include such unexpected events like dishonesty, carelessness or negligence of employees, stoppage of work due to power failure, strikes, riots, management inefficiency, etc.
Economic Causes: These include uncertainties relating to demand for goods, competition, price, collection of dues from customers, change of technology or method of production, etc.
Other Causes: These are unforeseen events like political disturbances, mechanical failures such
as the bursting of boiler, fluctuations in exchange rates, etc., which lead to the possibility of business risks.