Describe Three Primary Reasons a Small Business Might Fail

question 50

Essay

Describe three primary reasons a small business might fail.

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Definitions:

High-Low Method

A method employed in cost accounting that calculates estimated variable and fixed costs using the highest and lowest activity levels.

Fixed Cost

A cost that does not change with an increase or decrease in the amount of goods or services produced or sold by a business.

Degree of Operating Leverage

A measure that quantifies how much sales revenue can affect operating income due to the presence of fixed costs in a company's cost structure.

Pretax Profit

The profit earned by a company before any tax is deducted, showing the company's earnings directly from its operations.