Perez International
pfk182,
In you last post you say "sometimes, you get forced to push that "bankruptcy" button because of the financial institute not caring that the market is slow or down." I've said it before, and will say it again - the only reason that any company goes bankrupt is due to mismanagement of that company. That's ultimately the bottom line, regardless of any other reason stated.
Here are some relevant excerpts from a publication from Statistics Canada: Failing Concerns: Business Bankruptcy in Canada, and here is a link to same:
http://dsp-psd.pwgsc.gc.ca/Collection/Statcan/61-525-X/61-525-XIE1997001.pdf
"Bankruptcy is the market's way of eliminating inefficient
and unproductive firms. However, it is not without
its costs. Owners and managers lose the time and
money invested in the business; creditors and investors
often do not receive a complete pay-back for their financial
support of the business; and employees lose their
jobs and back wages."
"About half of young firms that go bankrupt do so primarily
due to factors beyond their control, namely economic
downturn and increases in competition, while the other
half fail primarily due to basic internal weaknesses. Even
in the case of bankruptcies that originate in external
events, internal weaknesses are important factors contributing
to failure."
"It is sometimes suggested that Canada's financial
sector may not do enough for small young firms
to help them get started. This study finds that often institutional
barriers to capital do present a major problem
to these firms. However, these barriers are almost always
associated with internal management deficiencies.
In particular, a large percentage of firms that face an external
capital constraint also lack the knowledge to pursue
different financing options."
"Some firms fail simply because they could not build
the basic internal competencies to survive. These are
the businesses that fail due to factors within the control
of owners or managers. The basic internal competencies
that are most frequently lacking here are strong general
and financial management skills.
Others develop some of these competencies but still
fail due to an external shock. And even those that fail
primarily for external reasons have the potential to develop
internal competencies that may help strengthen the
firm against bankruptcy. Internal deficiencies still figure
prominently in the demise of firms that fail due to external
shocks.'
"What would have helped these firms? Basically, this
study finds that an ounce of prevention is worth a pound
of cure. Developing adequate equity and making greater
use of outside expertise is seen as the route most of
these firms could have used to reduce their chances of
bankruptcy. The world in which these firms operate is
imperfect because of the existence of asymmetric information.
Investors and creditors have a difficult time
evaluating new firms. They look for basic internal competencies.
One way to evaluate the financial side of the
firm is to look at the extent to which others value the firm;
in particular, how willing are others to invest in that firm.
Hence the importance of equity to the survival of firms
becomes self-evident. Managers must also be trained
in both general management and financial management
skills so that they can demonstrate the worth of that firm
by attracting investors."
Sorry for the long post, but click the link for a very informative read.
