The causes of failures, as summarized by the commercial agencies, may be grouped in the following two main classes, viz., causes for which the management of the failing concern may be held responsible, and outside factors over which the business can exercise little or no control.

In the first group we find such causes as lack of capital, incompetence on the part of the management, the granting of unwise credits, etc. About 80% of all failures are due to this group of causes.

The second class includes such factors as losses by storms, floods, and similar disasters, unexpected failures of other concerns, severe competition, etc. This group of causes accounts for approximately 20% of the failures in the United States.

A few of these factors that are most closely related to the subject of financial management will be considered in the next few sections.