Even businesses that appear to be in good standing may be at danger of going bankrupt during uncertain economic times. It is necessary to delve beyond conventional indications and comprehend systemic reasons in order to identify early warning signs.

In many cases, corporate crises don’t emerge abruptly, but rather gradually manifest through early, often not obvious, signs. Below, I highlight 12 critical indicators that, if carefully observed, can anticipate risk situations and enable the adoption of strategic measures to restore financial performance, strengthen governance, and ensure sustainable business continuity.

12 Signs a Company is Going Bankrupt

Before declaring bankruptcy, companies often demonstrate financial, operational, and behavioral signs that can be identified by business management experts.

A systematic analysis of these indicators is essential for strategic decision-making. Here are the main ones:

1. Deterioration of operating cash flows

Recurring negative operating cash flow is one of the first signs that a company’s financial structure may be collapsing. Even when the income statement shows a profit, the absence of net cash flow indicates that the company is unable to finance its operations with its own resources.

This jeopardizes essential payments and may force emergency borrowing—further worsening the situation.

2. Silent reduction in EBITDA margin

A subtle but steady decline in EBITDA margin reveals a structural decline in operating profitability. This signal is especially critical for companies operating in sectors with tight margins and high competition, as it may reflect a loss of scale, operational inefficiencies, or an increase in fixed costs without adequate revenue growth.

3. Frequent restructuring without a clear strategy

Constant reorganizations in the company’s structure, without connection to clear strategic objectives , often reflect disorientation in leadership.

Successive changes in positions, disbanded departments, and improvised internal mergers are signs of a desperate attempt to correct problems that were not properly diagnosed.

4. Constant delays with strategic suppliers

Delaying payments to key suppliers compromises operational continuity and is often used as a short-term solution to stem cash outflows.

However, this behavior undermines trust in the company and tends to generate demands for advance payments, supply restrictions or loss of commercial conditions.

5. High turnover in financial management

Companies with successive changes in positions such as CFO or controller tend to face difficulties in strategic alignment, in addition to losing consistency in the execution of recovery plans.

In many cases, the departure of these professionals is due to a lack of transparency or conflict with unrealistic expectations from senior management.

6. Accounting reclassifications and audit reservations

Manipulation of accounting classifications, such as deferring expenses or anticipating revenue, distorts financial reality and generates alerts in external audits.

Qualified reports, especially those indicating significant uncertainty regarding operational continuity, should be taken with the utmost seriousness by stakeholders.

7. Debt above the industry average

A high level of debt, especially with a greater concentration in the short term, indicates that the company is financing its working capital in an unsustainable manner.

This reduces financial room for maneuver, increases the cost of capital, and puts the operation at risk if there is a change in interest rates or a break in the receivables cycle.

8. Decline in inventory turnover (financial cycle)

When inventory turnover slows, it may be a sign that the market is reducing demand or that the company has lost competitiveness. Furthermore, unnecessary purchases or purchases that are misaligned with the commercial and operational strategy can also lead to product backlogs and inefficient capital employed. This combination extends the financial cycle and compromises liquidity, especially when inventories are financed by third-party capital.

9. Strategic CAPEX Freeze

The suspension or postponement of essential investments —such as automation, technological innovation, logistics expansion, process modernization, or new product development—is often a clear sign that a company has entered defensive or cash preservation mode.

Although, in some cases, the measure may be necessary in the short term, the continued postponement of these strategic investments compromises the company’s ability to gain efficiency, meet new market demands and maintain its competitive advantage.

Over time, this paralysis leads to lost productivity, outdated technology, reduced adaptability, and, consequently, hinders the resumption of sustainable growth. The systematic freezing of strategic CAPEX thus creates a cycle of operational and competitive stagnation that is difficult to reverse in the medium and long term.

10. Reopening or constant review of guidance

Companies that constantly review their projections demonstrate weak planning governance.

A lack of predictability reduces market and internal team confidence, affects brand value, and may indicate that the financial data used for decision-making is flawed or inconsistent.

11. Growth financed only by debt

Expanding operations solely through debt, without the counterpart of sustainable revenue growth, operational efficiency, or cash generation , creates an artificial growth scenario. This model makes the company overly dependent on third-party capital and vulnerable to macroeconomic fluctuations, rising interest rates, and abrupt changes in demand.

Furthermore, non-organic growth based solely on debt often masks structural weaknesses and postpones necessary adjustments to the business model. Without solid organic growth—supported by market share gains, innovation, process improvements, and genuine profitability—the company becomes increasingly exposed to financial, operational, and reputational risks, which can drastically accelerate collapse in adverse situations.

12. Inconsistent communication with stakeholders

A lack of clarity and the absence of up-to-date reporting , particularly to investors, boards, and strategic partners, is a strong indication that the company is attempting to conceal material risks.

Opaque communication exacerbates the distance with those who could contribute to recovery and increases distrust in the market.

How to prevent a company from going bankrupt

The signs of a crisis represent only the first visible signs; understanding their causes requires a deep and integrated analysis that encompasses aspects of governance, strategy, finance, and operational execution. Below, I present a set of strategic and advanced actions that can be implemented to mitigate risks, reverse adverse scenarios, and strengthen corporate resilience:

Strengthen financial governance with crisis committees

Create multidisciplinary committees responsible for monitoring real risks, validating projections, and making emergency decisions based on data.

Review capital allocation policy

Capital allocation reviews should be conducted with analytical rigor, critically questioning each investment and eliminating emotional biases in decision-making. Decisions should be based on objective return on investment (ROI) metrics, prioritizing projects with real value-generating potential and strategic alignment.

Deploy integrated analytics intelligence

Develop a robust Business Intelligence (BI) framework , encompassing all areas of the company, with predictive indicators based on internal and external data. Broadly integrated information allows you to anticipate trends, identify operational, financial, and market vulnerabilities, and act preventively before potential problems evolve into critical situations.

Diversify revenue and risk matrix

Resilient companies expand their revenue streams and reduce excessive dependence on a few customers, distribution channels, or strategic suppliers. This diversification reduces exposure to sectoral shocks, demand fluctuations, and systemic disruptions, strengthening financial and operational stability in adverse scenarios.

Crisis management with simulations and contingency plans

Conducting periodic stress tests—including economic, liquidity, operational, and reputational scenarios—strengthens an organization’s ability to anticipate vulnerabilities and respond quickly and in a coordinated manner to adverse events. Well-structured contingency plans ensure greater agility in decision-making and minimize the impact of unforeseen crises.

When is it still viable to reverse the situation?

In critical moments, before the company needs to resort to judicial recovery, it is still possible to adopt a set of emergency and coordinated measures, such as:

• Structured debt renegotiation, with clear guarantees, realistic terms and staggered repayments.
• Sale of non-strategic assets to restore liquidity and reduce leverage.
• Negotiating agreements with stakeholders, aligning expectations, goals and any financial restrictions.
• Immediate and integrated alignment between CFO, CEO, board of directors, and investors, ensuring governance and speed in decision-making.