The importance of a business trajectory analysis under two dimensions: Economic and financial positions of Ecuadorian companies

Abstract

Ecuador is considered a country with high development and economic growth in the productive sector because of its involvement in many activities like: textile, food, and timberindustries, among others. For this reason, presently, smaller and medium companies (PYMES) have been created, since the country’s economy depends on them. Unfortunately, the average lifetime of these companies is approximately five years: 70% of them fail after three years of operation, and 10%, which is a relatively low percentage, come forward successfully after five years. Bad economic and financial management is responsible for 50% of all Ecuadorian companies that fail. This is due to the fact that an interrelation between all the company’s executives does not exist, particularly between commercial and financial directives, bringing about a lack of company liquidity and its subsequent bankruptcy.