Lesson 2.3.3

2.3.3 Causes of business failure Quiz: Pearson Edexcel Business, Unit 2

20 questions

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Lesson 2.3.3, Causes of business failure: 20 multiple choice questions for the Pearson Edexcel Business (9BS0), Unit 2: Managing business activities, written with Revision Ninja.

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The 20 questions

  1. Which option is an internal cause of business failure?

    • Rising interest rates
    • New competitor entry
    • Poor cash management
    • Economic recession

  2. Which option is an external cause of business failure?

    • Poor leadership skills
    • Poor cash management
    • Ineffective marketing
    • New competitor entry

  3. Which option is a financial cause of business failure?

    • Poor leadership
    • Ineffective communication
    • Overtrading
    • Marketing failure

  4. Which option is a non-financial cause of business failure?

    • Overtrading
    • High debt levels
    • Poor leadership
    • Poor cash forecasting

  5. Rapid expansion without sufficient finance leading to cash shortages is known as what?

    • Overmanning
    • Diversification
    • Overtrading
    • Under-capacity

  6. Which external economic change is most likely to cause business failure?

    • Ineffective recruitment
    • Economic recession
    • Poor cash control
    • Bad management

  7. Which outcome of poor market research is most likely to cause business failure?

    • Excess liquidity
    • Low sales revenue
    • Rising exchange rates
    • High interest rates

  8. Which financial condition indicates a severe risk of business failure?

    • High capacity utilisation
    • Retained earnings growth
    • Insufficient working capital
    • High profit margins

  9. A business is run by a single owner who refuses to delegate and makes poor decisions. Which category of failure does this fall into?

    • Internal, financial
    • Non-financial, internal
    • External, financial
    • External, non-financial

  10. Which option is an external financial cause of business failure?

    • Poor cash forecasting
    • High stock levels
    • Rising interest rates
    • Inefficient production

  11. Depending too heavily on a single buyer creates which type of failure risk?

    • External economic shocks
    • Exchange rate fluctuations
    • Overtrading
    • Single-customer dependence

  12. What is the main risk associated with poor cash-flow forecasting?

    • Rising tax rates
    • Unforeseen cash shortages
    • Higher production capacity
    • Increased competition

  13. Which factor is classified as an internal cause of business failure?

    • Economic downturn
    • Ineffective management
    • Changes in tax
    • New government regulations

  14. Combining high debt levels with falling sales creates what primary risk for a firm?

    • Economies of scale
    • Improved liquidity
    • High capacity utilisation
    • Insolvency risk

  15. Which option is a non-financial cause of failure in an expanding firm?

    • Cash flow deficit
    • Overtrading
    • High interest rates
    • Inflexible organisational structure

  16. Which external market shift can cause business failure?

    • Changing consumer tastes
    • Inadequate cash forecasting
    • Weak leadership
    • Poor inventory control

  17. A new government law banning a firm's main product is what cause of business failure?

    • External non-financial
    • Internal financial
    • Internal non-financial
    • External financial

  18. A business with high fixed costs and falling sales is most at risk from what financial problem?

    • Changing supplier terms
    • Poor stock rotation
    • Staff turnover
    • Liquidity crisis

  19. Which factor is an internal non-financial cause of business failure?

    • Increased taxation
    • Skill shortages
    • High interest rates
    • Cash flow shortages

  20. Which factor is an external financial cause of failure for an exporting business?

    • Poor quality control
    • Inadequate marketing budget
    • High staff turnover
    • Exchange rate appreciation

All Pearson Edexcel Business quizzes