He further divulges that contactors find it more difficult to undertake their projects without bank loans. Meanwhile, banks do not accept moving assets as adequate collateral for loans. Contractors usually do not have fixed assets like most manufacturers, and they usually have construction equipment rather than buildings and lands. Yin attributes insufficient capital to finance the construction undertakings by the contractors as one of the factors of the failure. The first four are directly proportional to the financial management of a company. They are (i) bank line of credit constantly borrowed to the limit, (ii) poor estimating and/or job cost reporting, (iii) ineffective financial management system, (iv) poor project management, (v) No comprehensive business plan and, (vi) Communication problem. According to Peterson, the Surety Information Office (SIO), which is an office that collects data on surety bonds in the United States, has identified six warning indications that show that a construction company may be in distress. Causes of Construction Company Failure According to Previous Research Business failure rarely depends on a single factor but it’s mostly occur at critical situation as a consequence of a complex process. Therefore, Construction Company must evaluate its financial performance, periodically, so that necessary and appropriate strategies can be put in place to maintain their survival. A periodic evaluation of the financial records of the company is a critical step in successful completion of a project. Therefore, it’s important to recognize business failure at the earliest stage in order to reduce the economic damages. The economic and social damages resulting from the business failure of construction companies are beyond the quantifiable costs to the company owners, share-holders, creditors and employees. However, thousands of these companies are facing bankruptcy and business failure, every year, and resulting in uncompleted private and public construction projects. According to Halim, the construction industry serves as an indicator of the nation’s economy condition. The oil and gas wealth contributes, on average of 5% to 9% of gross domestic product (GDP) of developing countries. Since the construction companies are the agent of transformation and development, they play a major role in national economy by using oil and gas wealth to construct economic and social facilities. The booming of this industry is as a result of the wealth generated oil and gas sales, which is reinvested in infrastructure. Thereby, construction companies are the backbone of real estate development. Large and complex projects has been constructed, these, cause an attraction of contractors and construction companies from all over the world. This transformation is due to the wealth generated by the oil industry. This has lead to an escalating of construction companies in the kingdom. Introduction Saudi Arabia has been undergoing transformation due to huge volume of construction activities since 1990.
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