Question

what is corporate failure give recent example

Answer 1

The term corporate failure entails discontinuation of company's operations leading to inability to reap sufficient profit or revenue to pay the business expenses . It happens due to poor management ,incomplete and bad marketing strategies.

In a business environment , corporate failure of firm is quite common , wherein only those firms survive ,that adopt themselves according to the market.

Symptoms of corporate failure are:-

Low profitability

High gearing

Low liquidity

The company's financial trend may represents these symptoms , which are related to one another . First of all the company's encounters a downfall in its profits which is reflected in the profitability ratios such as profit margin , return on capital employed, return on net assets.

Causes of corporate failures:-

Economic distress :- economic downturm is one of the major causes of corporate failures across many businesses .The decline in the economy may lead to the reduction in the activities ,which adversely affects the performance of many firms in the economy .

Management :- mismanagement implies improper management control over the

working of the employees and other business activities .

Technological causes :- with the advancement in the new technology new modes of doing business has been introduced, which is better then the traditional ones.

Toys R US is a more recent story about the financial struggle one of the largest world 's toy store chains . With the benefit of hindsight toys "R"Us may have led to its own undoing when it signed a 10 yr contact to be theexclusive vendors of toys on Amazon in 2000.

Amazon began to allow other toy vendor to sell it's site inspite of the deal.and toys "R" sued Amazon to end the agreement in 2004. As a result toys R us missed the opportunity to develop.