CAOT 31 Lecture Notes - Lecture 2: Gambling, Personal Bankruptcy, Population Ecology
Document Summary
Most small firms are born to stagnate or die. The younger and smaller the business, the more likely it is to cease trading a conclusion supported by a review of 34 business closure studies from around the world. Insolvency is term used when an individual or company cannot pay its debts. At its worst, it might lead to the personal bankruptcy of a sole trader or partnership as creditors pursue their debts by claiming the personal assets of the entrepreneur. The reasons mentioned in figure 16 are often present in many firms and represent weaknesses but only become threats when they start to interact. Business weaknesses often stem from the bad business decisions, which in turn may originate from the entrepreneurial character. However, the crisis that triggers the decline into failure is often brought about by some external factor such as an unexpected change in the economy or the marketplace.