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There are several reasons why company go to bankruptcy while having a good profit in financial statements.
Bankruptcy means company dint have enough cash to run their day to day activities, not enough cash to pay, Banks, Payable, Suppliers, Salaries etc
1: Company are showing fake sales,
2: Company having More sales on Credit
3: Company delaying payments to payable,s due to cash flow.
4: Due to Lack of reserves.
infect due to less cash cash equivalent.
there are major companies in world which are having good profits, good will and a worldwide brands but gone bankrupt.
Simply, at the origin of its result there is too high a proportion of transactions that have not resulted in cash flow, it have for example increased its term sales and that customers do not pay.
Investment: the company may realize losses or decrease its resltats while having a cash surplus. It can, for example, have invested a lot, so it was important that decrease its depreciation results or cause loss as she sees return of funds of an important sale to end at of the prior year.
Thanks for the invitation
Net positive income indicates that a good company in terms of activity and profitability .. But there are other indicators should be good to ensure the continuity of the company .. such as debt ratios, liquidity and cash flows .. can be the company to improve the value of net income through increased sales futures but it will be low cash flow indicators may continue to do so leads to the bankruptcy of the company.
With my best wishes to you
A legal purchase agreement can force a company to file bankruptcy even when it is realizing positive net income. As it happened in the recent example of a Japaneses airline, when they were forced to file bankruptcy after unable to pay for the purchase AirBus A380 fleet. They canceled their contract after realizing a low commercial viability of the aircraft under their line of operation. AIRBUS sued Airline for damages and won. Airline filed for bankruptcy after paying damages and the fleet of three A380 has been recently purchased by emirates airlines for a very low price.
agree with answer add by mr. Nadjib RABAHI
Its simple, a company can record fictitious revenue/income which is not recoverable off course, and then can record bad debts on all of its receivables and so can file bankruptcy.
Thanks for the invite , I agree with the experts answers
