Business Risk At The Hog Farm Case

2372 Words Apr 27th, 2016 10 Pages
1.
Business risk is the possibility of a business not meeting anticipated sales or be impacted by an expected influence that will result in a decline in profit. In the Thurmond Pig Farm case, the company faced high business risk by selling their hogs on the market at the spot price which has great volatility resulting in high fluctuation in the market. In the case the Thurmond 's had cut as many costs as possible by cutting livestock inventory and sitting on the majority of the hogs in hopes of the prices increasing in the near future. Though they had not yet secured contracts, the family was considering utilizing future contracts for up to three months out in order to hedge at least a portion of potential losses if the market were to continue to decrease due to unpredictability. In the Community General Hospital case the hospital would have faced minimal inherent business risk compared to the hog farm. The majority of expenses were tied up in fixed costs and the hospital needed to utilize the full potential of its available space. However, the market for hospitals is more constant and predictable as there is a constant flow of people who need to use its services. In order to control their business risk, the hospital needed to make full use of its rooms by either adding additional services to the hospital or leasing out sections to private practices. By tweaking its structure to make full use of its resources the hospital would have minimal business risk as long as it…

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