Question

update available weve made some fixes and improvements. to complete...
a. business risk: exposure to factors lowering profits or causing business failure
b. credit risk: probability of losses from borrowers non - repayment
c. market risk: risks of losses from market price movements
d. liquidity risk: risks of inability to meet short - term obligations

1. why might an entrepreneur still take on financial risk?
2. what are 3 - 5 ways to manage financial risk?

example: a small café owner diversifies risk by offering catering during slow seasons.

• how could ava apply this same thinking to her t - shirt business?

1. what are the 3 scenarios that business often plan for?

example: projected sales = 1,000 (best), 600 (worst), 800 (likely)
discussion:

• why should a small business owner plan for multiple outcomes?

Explanation:

1. Entrepreneurs take on financial risk for potential high - returns, to pursue their vision, gain market share, or innovate.
2. Ways to manage financial risk include diversification (e.g., expanding product lines), hedging (using financial instruments like futures), maintaining adequate cash reserves, and insurance.

For Ava's T - shirt business, she could diversify by offering related products like hats or accessories during slow sales periods.

1. Businesses often plan for best - case, worst - case, and most likely scenarios. Planning for multiple outcomes helps small business owners be prepared for different situations, manage resources better, and make more informed decisions.

Answer:

1. Potential high - returns, vision pursuit, market share gain, innovation.
2. Diversification, hedging, cash reserves, insurance. Ava could offer related products like hats or accessories.
3. Best - case, worst - case, most likely. To be prepared, manage resources, make informed decisions.