INTRODUCTION
Financial failure is a company’s inability to fulfill their debt requirements; thus, going into bankruptcy; experiencing liquidation and other form of asset seizure and distribution. A company’s financial failure is often a creditor’s delight; however, in order for all companies to operate and grow, they must, in one way or another, have some form of debt. An organized and duly structured business plan will always involve a financial plan that includes both short term and long term debts. If a company’s assets are less than their debts overall value, a loan or debt restructure maybe needed, which will then put the company in good financial standing with their debtors.
A company in financial distress is one that, “has difficulty paying off its financial obligations to its creditors,” according to www.investopedia.com. While financial distress maybe redefined based on each company’s financial challenges, this is the general definition given. To understand the various definitions associated with financial distress, we look at the definition given by Rose, et al (1996); where financial distress is defined as the, “Inability to pay one’s debt and …show more content…
The effects of a company in debt can be felt by everyone involved; the employees, shareholders, managers, investors and creditor alike, all suffers. Companies both locally and internationally have experienced damaging consequences because of ignorance to financial distress and the effects it had on a business’s stability and growth. With the use of business failure prediction models, many companies have seen a significant difference in their financial stability and have even been able to decrease their chance of going into bankruptcy. Bankruptcy prevention does not only make companies profitable, it improves a country’s economic status as
Financial failure is a company’s inability to fulfill their debt requirements; thus, going into bankruptcy; experiencing liquidation and other form of asset seizure and distribution. A company’s financial failure is often a creditor’s delight; however, in order for all companies to operate and grow, they must, in one way or another, have some form of debt. An organized and duly structured business plan will always involve a financial plan that includes both short term and long term debts. If a company’s assets are less than their debts overall value, a loan or debt restructure maybe needed, which will then put the company in good financial standing with their debtors.
A company in financial distress is one that, “has difficulty paying off its financial obligations to its creditors,” according to www.investopedia.com. While financial distress maybe redefined based on each company’s financial challenges, this is the general definition given. To understand the various definitions associated with financial distress, we look at the definition given by Rose, et al (1996); where financial distress is defined as the, “Inability to pay one’s debt and …show more content…
The effects of a company in debt can be felt by everyone involved; the employees, shareholders, managers, investors and creditor alike, all suffers. Companies both locally and internationally have experienced damaging consequences because of ignorance to financial distress and the effects it had on a business’s stability and growth. With the use of business failure prediction models, many companies have seen a significant difference in their financial stability and have even been able to decrease their chance of going into bankruptcy. Bankruptcy prevention does not only make companies profitable, it improves a country’s economic status as