In which situation would it be wise to stop expanding an enterprise?
Answer and explanation
Correct answer: When current operations are unstable and cash is weak
Expansion usually requires additional working capital, people, equipment, and management attention. If current operations are unstable and cash is weak, expansion can increase fixed commitments before the existing business is under control. The entrepreneur should first improve cash flow, process reliability, and operational performance. Stable demand, trained staff, and clear processes generally provide stronger conditions for carefully planned expansion.
Frequently asked questions
What is the correct answer to this question?
When current operations are unstable and cash is weak
Why is this the correct answer?
Expansion usually requires additional working capital, people, equipment, and management attention. If current operations are unstable and cash is weak, expansion can increase fixed commitments before the existing business is under control. The entrepreneur should first improve cash flow, process reliability, and operational performance. Stable demand, trained staff, and clear processes generally provide stronger conditions for carefully planned expansion.
Which subject and chapter does this question cover?
This is a Class 11 Business Studies question. Chapter: Business, Trade and Commerce. Topic: Business Risk.
