Chapter 12 Critical issues inMultiple-choi business success and failure

Chapter revision task

1 Investigate rental prices for commercial properties in your area.

a Compare costs for a small business to operate in a small local shopping centre
compared with a regional shopping complex such as Westfield.

b Are there any other conditions attached to this lease arrangement?

2 Identify three businesses and explain why location may be a critical factor in the success
of each.

3 Describe the strategies a business may use to create a sustainable competitive

advantage without lowering prices.
Chapter 12 Critical issues inMultiple-choi business success and failure

4 Evaluate the decision by a furniture maker not to adopt new manufacturing technology.
Chapter 12 Critical issues inMultiple-choi business success and failure

ce questions
1 Lack of business ability as a reason for business failure has decreased because:
A attending school in Australia is compulsory.
B more training and support are now available to business owners.
C business owners are paid to take TAFE courses.
D new owners must pass a business test to gain a business licence.

2 What is the main cause of business failure according to business surveys?

A Poor marketing
B Variable interest rates
C Failing to maintain control of finance and over-spending
D An upswing of the economy

3 The first thing a business owner must do to develop a business plan is complete:
A a financial forecast.
B the executive summary.
C a situational analysis.
D a staff evaluation.

4 Which of the following is NOT a contributing factor to over-extension of finance?

A Failure of management to anticipate an increase in interest rates
B Over-estimating interest expenses
C Under-estimating interest expenses
D Using long-term loans to purchase short-term assets

5 What is a business plan?

A A guide outlining how to run a business
B A framework for decision-making
C A production schedule
D A budget to plan expenditure

6 Interest rates vary because:

A market conditions change.
B the government dictates the rate to earn more tax revenue.
C the borrower may change the rate.
D variable interest rates are only available for mortgages.

7 What is the impact on a business when it over-extends on labour resources?

A The need to employ more staff
B Higher productivity and improved efficiency
C Lower productivity and better quality goods
Chapter 12 Critical issues inMultiple-choi business success and failure

D Higher wages expense

8 Which of the following best describes a business failure?

A The owners retire and close the business.
B The business is taken over by a competitor.
C The owners close the business owing to falling sales and profits.
D The business is unable to pay its liabilities as they fall due.

9 How can technology be used to gain a competitive advantage?

A Its high cost is spread over a long period.
B Its low cost is spread over a long period.
C It can reduce production costs and improve quality.
D It can reduce costs and output.

10 Which of the following best describes insolvency?

A When a business has more assets than liabilities
B When a business’s expenses are greater than its revenue in the long term
C When a business has more owner’s equity then debt
D When a business’s revenue is greater than expenses
Chapter 12 Critical issues inMultiple-choi business success and failure

Short-answer questions
1 Outline the importance of a business plan to an existing business.

2 Describe the factors that will contribute to the success of an entrepreneur who wishes to
open a new nightclub.

3 Explain how the internet may be used by a business to improve the chances of its
success.
Chapter 12 Critical issues inMultiple-choi business success and failure

Extended-response question
Ken Morris is an entrepreneur investigating whether to open a new restaurant. He has asked
for your help, as you are an experienced business consultant. Write a business report
outlining the factors that Ken Morris should consider when starting his new business. In your
report, explain the factors that will contribute to his success.