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Class 11 Business Studies Business, Trade and Commerce: NCERT Solutions for Question 7

This page focuses on the detailed Business, Trade and Commerce question answers for Class 11 Business Studies Business, Trade and Commerce, addressing the question: 'Explain the concept of business risk and its causes.'. The solution provides a thorough breakdown of the question, highlighting key concepts and approaches to arrive at the correct answer. This easy-to-understand explanation will help students develop better problem-solving skills, reinforcing their understanding of the chapter and aiding in exam preparation.
Question 7

Explain the concept of business risk and its causes.

Answer

Business risk refers to the possibility of inadequate profits or even losses due to uncertainties or unexpected events. Causes of business risks are as given:

1. Natural causes: Human beings have little control over natural calamities like flood, earthquake, lightning, heavy rains, famine, etc. they result in heavy loss of life, property and income of business.



2. 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.

3. Economic causes: These includes uncertainties relating to demand for goods, competition, price, collection of dues from customers, change to technology or method of production, etc. Financial problems like rise in interest rate for borrowing, levy of higher taxes, etc. also come under this type of causes as they result in higher unexpected cost of operation of business.

4. Other causes: These are unforeseen events like political disturbances, mechanical failures, such as the busting of boiler, fluctuations in exchange rates, etc. which lead to the possibility of business risks.

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