Name and explain two characteristics of business which involve possibility of loss.
The two characteristics of business which involves possibility of loss are as follows:
1. Ambiguity of Return: As there is no perfect knowledge among the businessmen regarding the return on the capital invested by him, Every businessman invests the capital (money) with a motive to earn profit. However, there is an equal chance of incurring losses too as the return is unforeseeable.
2. Involvement of Risk: Business risk refers to the possibility that the business may fail to earn sufficient profits or incurs losses due to certain unforeseen circumstances which are beyond its control. There can be many factors that are related to the risk like change in the tastes and preferences, more competitive markets, economic and political factors,etc.