Question
Explain the various external factors which lead to business risk.
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Answer
The various external factors which may give rise to such risks:
- Economic factors: are the most important causes of external risks. They result from the changes in the prevailing market conditions. They may be in the form of changes in demand for the product, price fluctuations, changes in tastes and preferences of the consumers and changes in income, output or trade cycles. The conditions like increased competition for the product, inflationary tendency in the economy, rising unemployment as well as the fluctuations in world economy may also adversely affect the business enterprise.
- Natural factors: are the unforeseen natural calamities over which an entrepreneur has very little or no control. They result from events like earthquake, flood, famine, cyclone, lightening, tornado, etc. Such events may cause loss of life and property to the firm or they may spoil its goods. For example, the Gujarat earthquake caused irreparable damage not only to the business enterprises, but also adversely affected the whole economy of the State.
- Political factors: have an important influence on the functioning of a business, both in the long and short term. They result from political changes in a country like fall or change in the Government, communal violence or riots in the country, civil war as well as hostilities with the neighbouring countries. Besides, changes in Government policies and regulations may also affect the profitability and position of an enterprise. For instance, changes in industrial policy and trade policy annual announcement oft he budget amendments to various legislations, etc. may enhance or reduce the profits of a business enterprise.
- Change in taste and preference: Tastes change with the change in the dynamics of the world.
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Ms. Neerja, who runs a computer stationery store, has the following transactions. Please help her with the cashbook for her operations.On 1st of January, 2014, she has ₹ 22,500/- in cash and ₹ 40,000 in bank account.
(ii) On 5th January, 2014, she makes a cash sale of ₹ 19,500.
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(iv) On 9th January, 2014, she buys CDs and pendrives and makes a cheque payment of ₹ 5,000.
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(vi) On 17th January, 2014, she withdraws cash of 15,000 from her checking account.
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(viii) On 24th January, 2014, she pays the monthly rent of ₹ 12,500 by cheque.
(xi) On 29th January, 2014, she deposits ₹ 25,000 in her bank account.
(ii) On 5th January, 2014, she makes a cash sale of ₹ 19,500.
(iii) On 7th January, 2014, she receives a cheque for ₹ 16,000 from Excel Company for sales made in December
(iv) On 9th January, 2014, she buys CDs and pendrives and makes a cheque payment of ₹ 5,000.
(v) On 12th January, 2014, she makes cash payment of ₹ 25,000 for various stationery purchased.
(vi) On 17th January, 2014, she withdraws cash of 15,000 from her checking account.
(vii) On 18th January, 2014, she pays salary of ₹ 25,000 to her sales staff.
(viii) On 24th January, 2014, she pays the monthly rent of ₹ 12,500 by cheque.
(xi) On 29th January, 2014, she deposits ₹ 25,000 in her bank account.
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