Abstract
The objective is to develop a simulation model of a startup to assess the ceteris paribus effects of (16) different parameters on the likelihood of financial failure. The deterministic growth path is described by a second-order Pascal distribution. Uncertainty is incorporated assuming a random variable proportional to sales. Three criteria for financial failure are developed to assess the likelihood of different failure types (profitability, solidity, and liquidity failures). Finnish data from 9,066 non-failed and 118 failed startups are used to approximate the value range of the parameters in non-failed and different types of failed startups. For each parameter, effects are analysed for 25 different values based on 1,000 simulation rounds each. The findings strongly emphasise the central role of internal rate of return in the likelihood of each type of failure. They also emphasise importance of early generation of sales for the likelihood of profitability failure and the strong effect of fixed expenses, size of initial investment, and initial equity capital on failure likelihood.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callMore From: International Journal of Management and Enterprise Development
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
