Question

Approximately 90 percent of small businesses that fail do so because of ________.

A. not enough money flowing out of the business
B. too much money flowing in to the business
C. lack of profitability
D. cash flow problems

Answer 1

Most small businesses fail due to cash flow problems, which can result from numerous factors such as management issues, competition, and unpredictable market conditions.

Step-by-step explanation:

Approximately 90 percent of small businesses that fail do so because of cash flow problems. In the context of a perfectly competitive firm, consistent failure to make money inevitably leads to 'exit', a term that understates the harsh impact on the stakeholders involved. Many factors contribute to business failure, including but not limited to poor management, unproductive workers, fierce competition, and changes in market conditions affecting the cost of inputs and demand for outputs. A firm must be proactive in managing cash to ensure the financial health and longevity of the business.