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Essay / Research Paper Abstract
This 27 page paper considers the way in which models of business failure may be applied to real life examples of failed companies that applied for Chapter Eleven Bankruptcy. The paper starts with the consideration of two companies; Enron and WorldCom, outlining the reasons and circumstances surrounding their failure. The writer then considers several models that can be used to predict business failure. These include Altman's Z-Score Model, Argenti’s Failure Model and others. These are then applied to the cases of Enron and WorldCom in order to ascertain if they would have been able to predict these bankruptcies in advance. The bibliography cites 22 sources.
Page Count:
27 pages (~225 words per page)
File: TS14_TEbufail.rtf
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Unformatted sample text from the term paper:
could increase as well as decreases was widely accepted. There was often a perception of risk reduction when blue chip shares where the subject of an investment. However, recent events
have indicated otherwise. There have been difficulties faced by many of these often supposed safer companies, such as Marconi. In this company there have been failures and the shareholders face
losses, but these events have not been unexpected, they were lead up to with notices and warnings. The losses are great, but are not unexpected. However, if we look at
other companies there have been some more surprising bankruptcies. Both Enron and Woldcom were unexpected, both in the extent of the losses and the speed of the problems. These two
companies have resulted in heavy losses for both shareholders as well as lenders and other creditors. The problem with these companies was seen in the way that the problems emerged
and the lack of expectation that manifested prior to their collapse. The key factor that any creditor may be interested in will be the viability of the business to
continue. Indeed, annual accounts are prepared on the basis that the business will be ongoing for the next twelve months. This is known as the going concern concept1. In looking
at the viability of the business the potential creditors are seeking to ensure that any amounts borrowed will be repaid. In the case of both Enron and Worldcom tremendous
amounts of money have been lost, all because the failure of the business had not been predicted or expected. If these types of losses are to be prevented or
minimised in the future there will need to be the use of more accurate prediction models that look more than at the credit history of a company and its cash
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