A “going concern” refers to a company’s ability to continue functioning as a business entity in the near future. It is extremely rare that auditors make such mention in the passing.
However, Kingfisher Airline auditors asked if Kingfisher Airlines could be even described as a ‘going concern’. Means auditors were suspicious about that company would able be survive in near future, that’s why it was possible that KFA could even be described as ‘going concern’
Every business is exposed to 3 types of risks.
1. Market Risk
2. Credit Risk
3. Operational Risk
Market Risk: Market risk is referred to as decline in value of investment over a given period of time due to economic slowdown, policy changes or any other event that may impact the market.
Credit Risk: Credit risk is basically an investment risk of lose incurred from borrower’s default.
Operational Risk: Operational risk arises from failed or inadequate internal process, people or any other external event.
If we take latest example of Kingfisher Airlines, I would consider it exposed to primarily operational risk and secondary market risk.
Primarily Operational Risk is because since it’s inception in 2006 it has never made any profit and in-spite of that extra services have been provided continuously, without strengthen it’s presence in domestic market and gaining experience in aviation industry, it has been opened for international routes and etc.
Secondary Market Risk because of rise in fuel prices and taxes, however these are valid for all aviation industry but other companies are still making profit. So I have consider these elements as secondary.