This company has already not posted any annual accounts for three consecutive years.
Such companies automatically score -5.
Doing business with such companies is highly inadvisable.
They also run the risk of the courts dissolving them.
Judicial dissolution:
On application by any interested party or the public prosecutor's office, and unless matters are remedied while proceedings are underway, the court of commerce in whose jurisdiction the company has its registered offices can pronounce a company dissolved if it has failed to post its annual accounts for three consecutive financial years.
One quarter of those which fail have a general indebtedness > 100% (*)
A general indebtedness of < 50% is absolutely healthy.
General indebtedness = debt/total assets
This shows what percentage of a company's total funds is being provided by third party funds, or debt.
Being > 100% indebted means a company's equity assets are negative, due to carrying over major losses:
so its liabilities exceed 100% of its total assets.
Such a situation is unsustainable in the long term (cf.
alarm bell procedure).
= A very bad sign!
Businesses do benefit from having a certain level of debt, however, as interest on debt capital is tax-deductible, for example.
Deducting notional interest also plays a major role in choosing between debt and equity in Belgium.
(*) Source: Companyweb: results based on our own study into causes of bankruptcies.
