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What is the relationship between sales growth and insolvency risk?Nataša Šarlija,
Sanja Šimić,
Biljana Đanković, 2023, original scientific article
Abstract: 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 data
set of 4271 SMEs in Croatia. The results confirmed that there is a relationship
between sales growth and insolvency. Better indicators exist with solvent and
growing 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 contributes
to a deeper understanding of the relationship between sales growth and
insolvency and empirically demonstrates that sales growth over 200% per
year induces the highest probability of insolvency compared to other lower
levels of growth.
Keywords: SMEs growth, insolvency risk, sales growth, financial indicators, insolvency prevention, bankruptcy
Published in DKUM: 28.05.2025; Views: 0; Downloads: 2
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