Is A Lack Of Funds The Only Reason A Company Goes Bankrupt?

[Good-Guy]

We all should realize the role finance plays in any kind of firm. finance is extremely crucial aspect of any kind of company and this is why finance in itself is a really huge field that is often studied by various experts and analysts who tend to run the business. During the Covid-19 pandemic, many major businesses filed for bankruptcy. These companies include major food chains, supermarkets, and manufacturing firms, etc. Whenever we heard the term "Bankruptcy", we get the feeling that a company might be filing for bankruptcy because the company simply ran out of capital or reserve cash that is required to carry out essential business operations for the survival of the company.

However, I believe that a lack of capital might not be the only reason why a business might file for bankruptcy. A company might have enough capital to survive for some more time, but they think that this is the right time to file for bankruptcy because carrying out basic businesses activities might not be a possibility in the future and this is exactly what happened to many companies around the world in the year 2020. So what could be other reasons for a company going bankrupt? Is this the problem of funds alone?

 

[Kingsley]

When we consider why a business venture sudden liquidate and sometimes become bankrupt, we may think that is is all because they suddenly run out of fund, but sometimes this is not always true. Although we know that when a business runs out of funds there are very high chances for it to liquidate and in a worse case it may lead to them becoming bankrupt.

The truth is lack of funds is one of the major why a business venture may become bankrupt but it is certainly not the only reason. Now lets take for instance a business organization that was doing well in a particular country and they are managing there debt very well and all of a sudden the government of that country try now made a la that goes against the operations of the business organization with immediate effect, automatically the sales level will drop and that will affect the growth of the business venture. This can make them unable to pay up workers and this may also affect them paying up their debts, automatically they may become bankrupt.

Again the face of war and economic and political instabilities will certainly affect the operations of business and cause them to liquidate.

 

[funmi]

I really don't think that lack of fund is the sole reason why companies go bankrupt. I am not disputing your point but there is one more point that can still be included in the points.
Having good management skill or knowledge is very important in business. If someone lack good knowledge in management can make a business to fail.
I have an experience of a woman who is very close to me. Her husband was a very rich man,(he is late now) she manages a catering business. When the husband was alive, he usually pulps money into her business to the extend that he usually pay for her rent for the shop where she was using then.
What I noticed about her was that she she has a lot of people who are learning from her and they pay for their training but still she complains about not having money every time. Despite the money the husband used to support her, she still lacks a lot and complains and the also get loans too. After some time she business fold up even when the husband was alive then.
So, I came to the conclusion that she didn't manage the business very well that was why it failed. So management is very important in order to avoid bankruptcy in business.

 

[Alexandoy]

My understanding of bankrupt or bankruptcy is that there are no more funds for the proper operation. A company or a person may file for bankruptcy depending on this intention. But that doesn't mean that he is really bankrupt for he would make it appear that his company or himself has no more financial capability to continue the business. When I closed my business it is more of another reason and not due to lack of funds. I have to admit that once in a while I would get a loan for the operation of my business but once we are able to collect from the customers our liquidity is good. The reason why I filed for bankruptcy is the misunderstanding with a business partner. The business is a sole proprietorship but there is a hidden business partner which did me wrong.

 

[Sotherefore]

I don't think that is the reason , a lot of business organisation are being bankrupted , there are other reason it may be because the business organisation does not have the the technical know-how on how to manage the business successfully , In every business organisation when the business owner is not employing the right people into the business organisation the business is not likely to run smoothly because technical know-how is one of the most important thing in any business organisation.

Another thing is that a company may have the required money that is needed to run itself successful but because of lack of proper management in the business organisation the little and all the resources of the business maybe mismanage which may lead to bankruptcy in a business organisation.

Another thing that could be a reason why a business who was operating perfectly before is no more operating is because of dubious people an employer has employed into the business organisation . This is one of the most important thing we need to consider when we are starting up a business and if we employ dubious people into our business organisation the risk of business failure will be high since these people will not look for an opportunity to grow our business but only to cheat.

 

[Yusra3]

No, there is no a single reason for firm insolvency except that of lack of money. However, cash flow complications and limited capital are not the only factors that cause a corporate bankruptcy but there are more reasons to bring that up. Among other things, these elements are strained finances, leadership dysfunction, being unable to adapt to market changes, losing competitive advantage, and sensitive economies. Also included are litigations involving significant amounts of money, and in case of being debilitated, by fraud or improper actions by the management. Finally, disruptive events can occur and affect the operations of this organization. Prudent financial planning, rational strategies, and a reasonable fund for crisiscome to rescue an enterprise from being insolvent in either case..