Why should an entrepreneur diversify sources of income?
Answer and explanation
Correct answer: To reduce the risk of depending on one source
Income diversification means earning from more than one product, customer group, or business activity. If one source becomes weak or stops, other sources may continue supporting the enterprise. Diversification therefore spreads risk and can improve stability, although it does not remove every risk. It does not mean removing customers, reducing usefulness, or abandoning accounting records.
Frequently asked questions
What is the correct answer to this question?
To reduce the risk of depending on one source
Why is this the correct answer?
Income diversification means earning from more than one product, customer group, or business activity. If one source becomes weak or stops, other sources may continue supporting the enterprise. Diversification therefore spreads risk and can improve stability, although it does not remove every risk. It does not mean removing customers, reducing usefulness, or abandoning accounting records.
Which subject and chapter does this question cover?
This is a Class 11 Business Studies question. Chapter: Business, Trade and Commerce. Topic: Business Risk.
