ON DISCUSSION OF THE RISK OF THE COMPANY’S INSOLVENCY

Abstract

"Insolvency" in commercial legislation business economy is generally understood as the lack of opportunity for timely and full payment of the company's monetary liabilities. This is a concept of the state of insufficient operational potential and strategic capacity to repay debts to creditors, suppliers, personnel and the country. It expresses that there are limitations in the quality of the value disposal of the management to be used to generate liquidity funds, relevant in terms and size volumes and collection of upcoming payments.

The juridical fact of insolvency in the commercial legislation in Republic Bulgaria is regulated as impossibility to fulfill a monetary obligation with reference to a commercial transaction, public debt, private state receivable or payment of wages. Insolvency occurs due to lack of financial assets and/or other highly liquid assets. The refusal of payment by the debtor company as well as the suspension of payments does not mean insolvency. According to the commercial law, insolvency is the basis for initiating bankruptcy proceedings when the difficulties in making payments are permanent (long-term) and when the debtor company does not have assets bigger that the total amount of monetary liabilities. Apart from the two mentioned hypotheses, insolvency is not considered a reason for initiating insolvency proceedings.

The economic content of insolvency is formed by the size and structure of assets, debt, expenses and income. It reflects the rationality of the balance between resources and capital as well as the effectiveness and sustainability of business operations. In business economics, it is assessed and analyzed with greater impact on the current property status and business functioning or with a focus on the long-term sustainability and strategic development of the company. On this basis, there are two types of insolvency - short-term and long-term. The first one is seen during temporary difficulties of payment of monetary liabilities in the course of current operations; the second one is considered to be a broad concept of the lack of strategic capacity to carry out financial payments. In the current report is rejected the prioritization of short-term or long-term insolvency.

The risk of insolvency of the company can be defined as a risk of inability to return monetary liabilities. This is an event with unfavorable consequences for all stakeholders. It presents a possible negative deviation from the pre-set values ​​of resource characteristics, capital, business activity, financial assets. In the context of dynamic processes in the modern business economy, the study of the risk of insolvency is associated with the subjective interpretation and presentation of each danger with words and expressions inherent in natural human language. It is necessary to replace the traditional statistical measurement with a methodology for work with data set in a fuzzy (loose, unclear) form. The risk of insolvency forecasting and management require terminological and methodological improvement.