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What are the major causes of business failure

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Reference no: EM132730797

Problem - Kimberly MacKenzie-president of Kim's Clothes Inc., a medium-sized manufacturer of women's casual clothing-is worried. Her firm has been selling clothes to Russ Brothers Department Store for more than 10 years, and she has never experienced any problems in collecting payment for the merchandise sold. Currently, Russ Brothers owes Kim's Clothes $65,000 for spring sportswear that was delivered to the store just 2 weeks ago. Kim's concern arose from reading an article in yesterday's Wall Street Journal that indicated Russ Brothers was having serious financial problems. Moreover, the article stated that Russ Brothers' management was considering filing for reorganization, or even liquidation, with a federal bankruptcy court.

Kim's immediate concern is whether her firm will collect its receivables if Russ Brothers goes bankrupt. In pondering the situation, Kim has also realized that she knows nothing about the process that firms go through when they encounter severe financial distress. To learn more about bankruptcy, reorganization, and liquidation, Kim has asked Ron Mitchell, her firm's chief financial officer, to prepare a briefing on the subject for the entire board of directors. In turn, Ron has asked you, a newly hired financial analyst, to do the groundwork for the briefing by answering the following questions:

Required -

(1) What are the major causes of business failure?

(2) Do business failures occur evenly over time?

(3) Which size of firm, large or small, is more prone to business failure? Why?

Reference no: EM132730797

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