Today we’ve provided possible responses for Section A, questions 1c and 1d. These aren’t supposed to be ‘perfect answers’ (is there such a thing?), but they could provide a starting point if you are stuck. Each questions carries 3 marks.
Paper 1: Investigating Small Business (2021 paper)
Section 1
(c) Explain one drawback to a business of having low levels of cash.
One drawback of having low levels of cash for a business is that it may struggle to meet its financial obligations, such as paying bills or buying inventory. This can lead to missed payments or even bankruptcy if the business is unable to secure additional funding. Additionally, having low cash reserves may limit the ability of the business to take advantage of new opportunities or invest in growth initiatives. Overall, having insufficient cash on hand can create significant financial challenges and limit the long-term viability of a business. (3 marks)
(d) Explain one way an entrepreneur can reduce the risk of failure when starting a new business.
One way an entrepreneur can reduce the risk of failure when starting a new business is by conducting thorough market research before launching the business. This involves gathering information about the industry, target market, competitors, and consumer needs and preferences. By conducting market research, the entrepreneur can identify potential challenges and opportunities, refine their business concept, and develop a strategy for entering the market. This can help them to make informed decisions about the business, such as setting prices, developing marketing campaigns, and designing products or services that meet the needs of the target market. By reducing uncertainty and increasing their knowledge of the market, the entrepreneur can improve their chances of success and reduce the risk of failure. (3 marks)
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