IA Bankruptcy Prediction

The Bankruptcy Prediction main ideas

• Definition of Bankruptcy
• Types of costs of Bankruptcy
• Corporate Failure and Dimensions of Financial Distress
• stages of financial distress
• Determinations of financial distress
• Causes of Business Failure
• Consequences of Financial Distress
• General Motors ( GM )
• Conclusion

Bankruptcy

• defined as the inability of the firm to pay its debts obviously, being bankrupt is much worse than losing technical liquidity.
• Although, bankruptcy comes out with a steady decline of asset value below liabilities, deciding to put an end to the life of a business may be a better decision than trying to survive .
• The main reason of bankruptcy or business failure is incompetence and unsuccessfulness of managers.
• With low sales and high production costs.
• If a company comes to edge of bankruptcy, it would negotiate with its creditors or claim credits from banks, or file a bankruptcy petition to the court. If bankruptcy decision was taken .
• the company would act in two ways:

1. The company may engage in a reorganization process,
2. Or it takes liquidation decision.

Both actions require that, the company files a bankruptcy petition to the court.

Costs of Bankruptcy

Costs of Bankruptcy can be classified in 2 types as;

1. Direct Costs of Bankruptcy
2. Indirect Costs of Bankruptcy