The criteria to identify company’s crisis in SME sector

Abstract

The prediction of companies’ crisis and assessment of crisis probability is an important theoretical and practical problem which is being analyzed by various authors from finance, business administration and law perspectives. Various authors have presented different models for company’s crisis identification, but most of them are based on the quantitative assessment of financial ratios. Such models have a limited usability because the lack of factors assessed in case of small and medium companies. In SMEs sector the company’s crisis identification is specific because of the nature of SMEs business management which creates the strong dependability of business results on human resources and environmental factors. In this study the set of qualitative and quantitative factors is proposed to support the development of company’s crisis identification models for SMEs. The proposed set of criteria allows identification of the real situation in the company regarding not only the financial statements but also a wide variety of factors related to company’s management capabilities, competencies of human resources, possible impact of internal and external environmental factors and other important non-quantitative aspects. The prosed set of criteria might be used for the development of company’s crisis identification model which would help to forecast the possible company’s crisis in SMEs sector.

DOI: http://dx.doi.org/10.5755/j01.ee.26.2.8779