THEORETICAL ISSUES OF FINANCIAL DIFFICULTIES

Abstract

A central concept of economics means that, in the long run, forces acting under market conditions direct the markets towards balance. Companies producing at average cost and earning normal profit survive on the market in the long run. Companies, which are unable to operate their resources reasonably efficiently, stop their activities and leave the market. When they leave the market not only the owners but all the actors of the market will lose, the suppliers lose market, the users have to look for new suppliers, the employees who temporarily become unemployed increase social costs, etc. It is important to clarify the theoretical and practical context of the companies with financial difficulties whether they survive or leave the market. In this study I try to clarify the theoretical context of financial difficulties, which may serve as the starting point of a comprehensive amendment of the bankruptcy act, having been in force for 10 years in Hungary.