Read the following case and answer questions that follow. Jill Kearns was in her first year of college, and was running low on money. She needed to make at least $500 to cover her expenses. She considered getting a full-time job, but realized that she did not have enough time to do her studies and keep the job. Her solution was to start a small business venture with the members of a jazz band to which she belonged. They would hold jazz concerts and sell tickets to Jill's performances. Jill's idea for this venture came from her and a friend's interest in jazz. As the popularity of jazz has grown, she would have seen the potential for a business venture expanding. The idea of using her interest in music to earn the money was very appealing. Currently, the group members have $500 in the bank. In order to give a concert, Jill anticipated that they would have the following start-up expenses: an advertising cost of printing posters, rent on a concert hall, cost of printing tickets, and incidental expenses for transportation, telephone calls, etc. By deferring as many payments as possible and obtaining credit, she found that they needed $465 to hold their first concert. Jill figured their total expenses would be about $2000. By giving two shows and multiplying the ticket price by the legal capacity of the hall, she calculated that the maximum gross receipts would be $2900. The business venture would earn a profit of $900! a. What risks are involved in this business venture? b. How can these risks be reduced or eliminated? c. Are there other strategies that could be employed such as risk transfer or risk assumption? If so, why and if not, why not?
Read the following case and answer questions that follow.
Jill Kearns was in her first year of college, and was running low on money. She needed to make
at least $500 to cover her expenses. She considered getting a full-time job, but realized that she
did not have enough time to do her studies and keep the job. Her solution was to start a small
business venture with the members of a jazz band to which she belonged. They would hold jazz
concerts and sell tickets to Jill's performances.
Jill's idea for this venture came from her and a friend's interest in jazz. As the popularity of jazz
has grown, she would have seen the potential for a business venture expanding. The idea of using
her interest in music to earn the money was very appealing. Currently, the group members have
$500 in the bank. In order to give a concert, Jill anticipated that they would have the following
start-up expenses: an advertising cost of printing posters, rent on a concert hall, cost of printing
tickets, and incidental expenses for transportation, telephone calls, etc.
By deferring as many payments as possible and obtaining credit, she found that they needed
$465 to hold their first concert. Jill figured their total expenses would be about $2000. By giving
two shows and multiplying the ticket price by the legal capacity of the hall, she calculated that
the maximum gross receipts would be $2900. The business venture would earn a profit of $900!
a. What risks are involved in this business venture?
b. How can these risks be reduced or eliminated?
c. Are there other strategies that could be employed such as risk transfer or risk assumption?
If so, why and if not, why not?
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