Question

Justify the following statement.

Changing fashions is one of the important causes of business risk.

Answer 1

1. Businesses face a variety of risks.
2. The risks can be due to the loss of goods by fire or theft, bad debts, changes in government policies, goods remaining unsold, etc.
3. Goods remaining unsold due to changes in fashion is also an important type of risk in the business. Due to this risk, businessmen can suffer loss.
4. However this risk is there in case of some goods only e.g. clothes, footwear, jewellery, accessories, sunglasses, etc.
5. This risk is not there in the case of food grains or vegetables, as they are essentials and their demand remains somewhat constant.
6. Therefore, fluctuations in fashion trends pose a significant risk to the business.