Different kinds of bankruptcy of enterprises

Bankruptcy is a financial crisis, characterized by a stable inability to meet the demands of creditors. Such a situation, as a rule, arises not simultaneously, and the reasons for its development can be many. In the world practice, even their own criteria have been worked out, for which an assessment of the bankruptcy of an enterprise is made and its types are singled out.

Early signs of bankruptcy

In fact, there are not so many basic signs, by means of which it is possible to determine the forthcoming bankruptcy of an enterprise at an early stage. This is primarily a delay in the timing of reporting. Such a factor may indicate financial fraud or simply the poor performance of the financial services of the enterprise.

Another criterion, which should be paid attention, are conflicts in the enterprise, the dismissal of people from key posts and a sharp increase in management decisions.

To less significant symptoms of the impending bankruptcy, which still should not be discounted, are:

• Significant decrease in cash on accounts;
• A sharp increase (decrease) in receivables;
• Reduction in production and sales;
• Increase in accounts payable.

Real and fictitious bankruptcy

Bankruptcies of enterprises receive the status of real if in the established period the enterprise incurred significant losses of capital. In this regard, it is completely untenable in terms of restoring its solvency. Further economic activities of such an economic entity can harm both its counterparties in particular, and the entire industry as a whole. Therefore, such a debtor is legally declared bankrupt.

The complete opposite of the real are the fictitious bankruptcies of enterprises. They are characterized by the fact that the debtor himself applies to the arbitration court. Most often, the reason for such actions is the desire to obtain discounts and installments to pay debts, or even a failure to pay them. If it is proved that the debtor at the time of filing such a statement was able to satisfy all the creditors' claims in full, he will be liable for the damage caused to him.

What is the stage of bankruptcy and technical bankruptcy?

If an enterprise is in the state of bankruptcy or declared bankrupt, this does not mean that it should cease to exist. So, for example, there are 3 stages of bankruptcy of enterprises:

1. Hidden price reduction of the enterprise.
2. Financial instability.
3. Legal bankruptcy.

Enterprises in the early stages of bankruptcy can still normalize their activities with proper financial management. The same applies to technical bankruptcy. This term indicates the situation when the payable of an economic entity arises from a significant delay in payment on the part of its debtors. An essential condition for the recognition of bankruptcy as purely technical is the excess of the amount of its uncollectible receivables over the accounts payable.