Skip to main content
FLC
Start Learning
Back to the lesson plan

Prints on letter paper. Turn off headers and footers in your print settings for the cleanest copy.

Financial Literacy Club

learnwithflc.org

NameDatePeriod

Understanding Businesses · Lesson 10

Business Risk

Part A. Vocabulary

Define each term in your own words.

Leverage

Concentration risk

Part B. Guided notes

Fill in each blank using the word bank.

Word bank: company's · customer · honestly · magnifies

  1. Name the risks — every business has them.
  2. Debt good and bad results.
  3. Concentration = too much riding on one , supplier, or product.
  4. Read the Risk Factors in a 10-K.

Part C. Check your understanding

Circle the best answer.

  1. A bakery gets 70% of its sales from one grocery chain.

    1. What's the biggest risk?

    • A. Concentration: losing that one customer would wipe out most sales.
    • B. Too many customers
    • C. Its margins are guaranteed
    • D. There is no risk

  2. 2. Borrowing money magnifies both good and bad results for a business.

    True/False

  3. 3. Where do public U.S. companies describe their major risks?

    • A. In the "Risk Factors" section of their annual report
    • B. Only in advertising
    • C. They're not required to
    • D. On product packaging

Part D. Apply it

Show your work.

  1. 1. Businesses A and B each have $100,000 of assets. A has no debt. B borrowed $60,000 at 6% interest. Ignoring taxes, what return on the owners' money does each earn if assets earn 10%? If assets earn 2%?

  2. 2. One customer makes up 60% of a company's sales. Why is that risky?

Part E. Think about it

Answer in complete sentences.

  1. 1. Which risk would worry you most if you owned a small business? Why?

  2. 2. How could a company reduce dependence on one big customer?

Exit ticket

Name

What does leverage do to a business's results?