Do business failures occur evenly over time?

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Do business failures occur evenly over time?

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Do business failures occur evenly over time?

Explanation & AnswerSolution by a verified expert

Explanation

Business failures do not occur evenly over time, nor do businesses are always immune. Various business failures occur each year, generally small firms. But large businesses also go bankrupt over time. Business failure occurs due to a decline in the present value of future cash flows caused by economic and financial factors or a combination of both factors. The firm's success or failure depends upon the sector the company is in, the state of the economy, and the operations of the company. During the Great Recession, many business failures occurred when six of the largest bankruptcies occurred in 2008 and 2009.

Verified Answer

Business failures do not occur evenly over time, nor do businesses are always immune. Business failure occurs due to a decline in the present value of future cash flows caused by economic and financial factors or a combination of both factors—this why many business failures occurred during the Great Recession.

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