Business failure

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Unformatted text preview: Business Failure A Business Failure is an unfortunate circumstance. Business The majority of firms that fail do so within the first year or two of life , other firms grow, mature, & fail much later. The failure of a business can be viewed a number of ways & can result from one or more causes. causes. Types of Business Failure 1.Technical Insolvency : Business Failure that Business occurs when a firm is unable to pay its liabilities as they come due. they 2.Bankruptcy : Business Failure that occurs when a firm’s liabilities exceed the fair market value of assets . assets Major Causes of Business Failure 1. Mismanagement 1. • The primary causes of Business Failure is mismanagement, which accounts about 50% of all cases. • Numerous specific managerial faults can cause Numerous the firm to fail. Over expansion, poor financial action, an ineffective sales force, & high production costs can all singly or in combination cause the ultimate failure of the firm. ultimate • Poor financial actions include bad capital Poor budgeting decisions, poor financial evaluations of the firm’s strategic plan prior to making financial commitments, nonexistent or inadequate cash flow planning, and failure to control rece...
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This note was uploaded on 03/24/2012 for the course BBA SBM taught by Professor Goa during the Spring '09 term at East West University, Chicago.

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