Unformatted text preview: Business Failure
A Business Failure is an unfortunate circumstance.
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. Types of Business Failure 1.Technical Insolvency : Business Failure that
occurs when a firm is unable to pay its liabilities as
they come due.
2.Bankruptcy : Business Failure that occurs when
a firm’s liabilities exceed the fair market value of
assets Major Causes of Business Failure
1. • The primary causes of Business Failure is
mismanagement, which accounts about 50% of all
• Numerous specific managerial faults can cause
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.
• Poor financial actions include bad capital
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.
- Spring '09