In other words, this company has already not posted any annual accounts for two consecutive financial years.
This is a really bad sign!
Such companies score -4 at most, or even worse if there are other bad signs involved.
It is highly inadvisable to do business with these companies, because they're either not really trading any more, which is why they're not posting any accounts, or they're deliberately refusing to meet their reporting obligations.
If the equity drops below 50% of the capital, this is due to the losses carried forward.
It is a serious signal.
Almost half of bankrupt businesses report this negative signal.
(*)
In the previous legislation (before 01/05/2019), this would engage the alarm bell procedure.
As of this observation, the general assembly had to be convened to deliberate on the dissolution of the company or decide in taking on other measures.
When the net assets would fall below 25% of the capital, any interested party may request the dissolution of the company before the court.
(*) Source: Companyweb: results based on our own study into causes of bankruptcies.
Negative returns for two years is a major heads-up to the Court of Commercial Enquiry at the Court of Commerce.
An established business which loses money year in, year out has no future anyway.
New businesses may often show a negative return (high startup costs, low sales at first, ...) but things should clearly be getting better after two years.
Profitability and liquidity together give a good idea of how a company is faring.
| Liquidity | Profitability |
|---|
| + | - |
| + | Healthy | Chronically sick |
| - | Temporarily sick | Dying |
(**)
(**) Source: Handbook "Financial analysis process" by Hubert Ooghe and Charles Van Wymeersch (Intersentia)
