For what reason a firm suffering losses decides to operate and not shut down.?

Question

please give this answer in detail atleast of one page

Answer 1

There could be several reasons for a loss making unit to continue operations. Some of the reasons could be as follows :
1.The owner foresees better times in the future and will make a turn around by coming out of the red.
2. Industries with very heavy investments generally require long gestation period before they actually starts delivering profit. Typically, the telecom industries where the capital investments are very high and takes time to recover such invetsments, in the intial years they operate at a loss.
3.There are firms which remains in operation only because if the unit is shut down the loss would be much more than while it is in operation.So, they minimize their loss by keeping the firm in operation.
4.Some noble enterprenuer continues to run their loss making unit only because several individuals are dependent on the firm for their livelihood.

Answer 2

1. the biz has capital (networth). Theoratically, it can keep running as long as its networth is not zero negative.
2. Its not easy to close a company. specially public limited companies. it has plenty of regulatory requirements related to employees, minority shareholders, lenders.
3. the losses may be temporary and probably due to market factors than factors internal to the company. such as macroeconomic factors, competition etc. it makes sence to stick around till the downturn economic/market cycle is over.
4. the losses are due to high investments for future, such as investments in machinery, technology etc. In this case definitely the company sees a great future even though its running losses.
5. Some promoters just do not shut dow a company due to the fear of losing face in the public or market. They just restructure the company like merge, hive off the loss making unit etc.
6. if the company is running losses due to bad management, the shareholders just change the management instead of closing the company.
7. If the company is a govt company, there is just no question of shuting it down.

Answer 3

you can suffer loses but not really be going down hill.
Upgrading equipment or putting $$ into your employees training and such can cause losses for a few years but it makes the company stronger. Money is not the only objective sometimes... hard to believe but true

Answer 4

There are variables including the business forecast, maybe the owner/management sees better times ahead.
Could be as simple as the owner/management not being quitters.
Someone may also have their house on the line with a second mortgage and they have to make it work or lose their property.

Answer 5

Try the google

Answer 6

ask google