A common financial risk that entrepreneurs encounter is:

• A. Guaranteed government subsidies
• B. Automatic profit increases every year
• C. Elimination of all business expenses
• D. Misappropriation of assets by employees

Answer: (D)

Verified step by step guidance

1. Understand the context of the question: The problem is asking about a common financial risk that entrepreneurs face. This requires knowledge of financial risks and their implications in business operations.
2. Clarify the term 'misappropriation of assets': This refers to the theft or misuse of a company's resources by employees, such as embezzlement, theft of inventory, or fraudulent expense claims.
3. Eliminate the incorrect options: Analyze the other choices provided. 'Guaranteed government subsidies,' 'Automatic profit increases every year,' and 'Elimination of all business expenses' are not realistic risks but rather hypothetical or overly optimistic scenarios.
4. Focus on the correct answer: Misappropriation of assets is a genuine and common financial risk for entrepreneurs, as it directly impacts the financial health and integrity of the business.
5. Conclude by emphasizing the importance of internal controls: Entrepreneurs can mitigate this risk by implementing strong internal controls, regular audits, and fostering a culture of ethical behavior within the organization.