What is the relationship between sales growth and insolvency risk?

Artikel

Sales growth is essential for an enterprise's survival and financial growth.If an enterprise manages to achieve sales growth, its expansion can be accomplished. However, does sales growth always have only positive effects?If the enterprise is not collecting enough cash, it can miss a payment on its debt, triggering a series of events that can lead to its insolvency. The goal of the paper is to explore the relationship between an enterprise's sales growth and its insolvency. The relationship is tested empirically on the dataset of 4271 SMEs in Croatia. The results confirmed that there is a relationship between sales growth and insolvency. Better indicators exist with solvent andgrowing SMEs than with insolvent and non-growing. Results have also shown that high growth can be at the same time a high risk. The paper contributesto a deeper understanding of the relationship between sales growth and insolvency and empirically demonstrates that sales growth over 200% peryear induces the highest probability of insolvency compared to other lowerlevels of growth.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Naše gospodarstvo / Our Economy ; ISSN: 2385-8052 ; Volume: 69 ; Year: 2023 ; Issue: 3 ; Pages: 1-11

Classification and Topics

• Classification: Wirtschaft ; Corporate Finance and Governance: General ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill ; Business Economics
• Subject: SMEs growth ; Insolvency risk ; Sales growth ; Financial indicators ; Insolvency prevention ; Bankruptcy

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Šarlija, Nataša ; Šimić, Sanja ; Đanković, Biljana
• Event: Veröffentlichung
• (who): Sciendo
• (where): Warsaw
• (when): 2023

Further information

• DOI: doi:10.2478/ngoe-2023-0013
• Last update: 10.03.2025, 11:43 AM CET