Several factors can contribute to financial instability in a business. These include:
External Economic Factors: Recessions, inflation, and changing market conditions can significantly impact a business’s financial stability. Internal Mismanagement: Poor financial planning, inadequate cash flow management, and inefficient resource allocation can lead to financial distress. Market Competition: Intense competition can erode profit margins and market share, leading to financial challenges. Regulatory Changes: New regulations or changes in existing laws can increase operational costs or restrict business operations.