Theoretical and Practical Decisions of Bankruptcy as one of Dynamic Alternatives in Company‘s Performance

Abstract

The problems of company’s alternative develop-ment, its bankruptcy and bankruptcy prediction have become very relevant in Lithuania during the last dec-ades. According to the different authors, every bank-ruptcy is assessed as its local phenomenon as well as the macro economic appearance, which brings a lot of economic and social consequences for people who lose their jobs as well as for appropriate institutions. Theo-retical results of research are often integrated into the process of company’s administration, however the ris-ing number of bankruptcies shows that bankruptcy pre-diction is not assessed properly in the practical level of company’s management. The administration practice of failed companies in Lithuania shows that this process often determines negative results in the company and is very painful for its employees as well as for its creditors and owners. The changes of external conditions and the pressure that company experiences in the nowadays market economy often go the limits of the company’s management competence. Working companies face the global transformation, which is very specific, so it is not always possible to apply the traditional means of crisis management in their administration. Bankruptcy, as one of crisis development alternative in the company, is pos-sible to avoid properly estimating bankruptcy probabil-ity and applying prevention means in company’s per-formance in time. When bankruptcy mechanism is late, to start new activities or to reorganize the company is often impossible because of the short company’s re-serves. Bankruptcy prediction should be based on the continual observation and assessment of its financial state in order to notice the very first bankruptcy fea-tures, to define their reasons and to estimate their solu-tion possibilities. The article deals with the theoretical dynamic alternatives of crisis development in a com-pany. Bankruptcy features are analyzed applying dis-criminant analysis.