Risks
Business risk
The possibility of loss (failure) or gain (success) inherent in conducting business
Direct competition
Rivalry between or among businesses that offer similar types of goods or services
Gross profit
Money left after the cost-of-goods expense is subtracted from total income (income from sales - cost of goods = gross profit)
Market structure
The type of market, or environment, in which businesses operate
Avoidance
A risk-response strategy that involves choosing not to do something that is considered risky
Economic risks
The possibility of loss or failure that occurs as a result of the economy
Indirect competition
Rivalry between or among businesses that offer dissimilar goods or services
Net profit
Money left after the cost-of-goods expense and the operating expense are each subtracted from the total income (gross profit - operating expense = net profit)
Monopoly
A type of market structure in which a market is controlled by one supplier, and there are no substitute goods or services readily available
Income
The money received by resource owners and by producers for supplying goods and services to customers
Human risks
The possibility of loss or failure from human error
Nonprice competition
A type of rivalry between or among businesses that involves factors other than price
Profit
Monetary reward a business owner receives for taking the risk involved in investing in a business; income left once all expenses are paid (income – expense = profit)
Oligopoly
A market structure in which there are relatively few sellers, and industry leaders usually determine prices
Reduction
A risk-response strategy that involves trying to reduce the chance of loss or severity of loss
Natural risks
The possibility of loss or failure from nature
Perfect competition
A market structure in which there are many businesses selling a lot of identical products for about the same price to many buyers; also known as pure competition
Profit motive
The desire to make a profit, which moves people to invest in business
Regulated monopolies
Monopolies that the government allows to exist legally under controlled conditions
Retention
A risk-response strategy that involves assuming responsibility for the risk rather than transferring it
Pure risks
Chances of loss that carry with them the possibility of loss or no loss
Price competition
A type of rivalry between or among businesses that focuses on the use of price to attract scarce customer dollars
Transfer
A risk-response strategy that involves moving the impact of a risk to someone or something else