Financial distress is a term in corporate finance used to indicate a condition when promises to creditors of a company are broken or honored with difficulty. If financial distress cannot be relieved, it can lead to bankruptcy. Financial distress is usually associated with some costs to the company; these are known as costs of financial distress.
Financial distress is a term in corporate finance used to indicate a condition when promises to creditors of a company are broken or honored with difficulty. If financial distress cannot be relieved, it can lead to bankruptcy. Financial distress is usually associated with some costs to the company; these are known as costs of financial distress.
Financial distress is a term in corporate finance used to indicate a condition when promises to creditors of a company are broken or honored with difficulty. If financial distress cannot be relieved, it can lead to bankruptcy. Financial distress is usually associated with some costs to the company; these are known as costs of financial distress.
Financial distress is a term in corporate nance used
to indicate a condition when promises to creditors of a company are broken or honored with diculty. If nan- cial distress cannot be relieved, it can lead to bankruptcy. Financial distress is usually associated with some costs to the company; these are known as costs of nancial dis- tress. 1 Cost of nancial distress A common example of a cost of nancial distress are bankruptcy costs. These direct costs include auditors fees, legal fees, management fees and other payments. Cost of nancial distress can occur even if bankruptcy is avoided (indirect costs). Financial distress in companies requires management at- tention and might lead to reduced attention on the opera- tions of the company. Another source of indirect costs of nancial distress are higher costs of capital as usually banks increase the inter- est rates if a state of nancial distressed occurs. 2 Options for relieving nancial distress If high debt burden is the cause of nancial distress, the company can undergo a debt restructuring. If operational issues are the reason for the distress, the company can ne- gotiate a payment holiday with its creditors and improve operations to be again able to service its debt.a 3 External links Indicators and Sources of Financial Distress Predicting Financial Distress of Companies: Revisit- ing the Z-Score and Zeta Models by Edward Altman Financial Distress, Bankruptcy Law, and the Busi- ness Cycle by Javier Suarez and Oren Sussman The Costs of Financial Distress across Industries by Arthur Korteweg Insolvency Service website Probability of bankruptcy screener for public com- panies based on Altman Z Score 1 2 4 TEXT AND IMAGE SOURCES, CONTRIBUTORS, AND LICENSES 4 Text and image sources, contributors, and licenses 4.1 Text Financial distress Source: http://en.wikipedia.org/wiki/Financial_distress?oldid=600909565 Contributors: Chowbok, Sj, Ghoshsanjoy, Allens, SmackBot, Ohnoitsjamie, Civil Engineer III, MatthewMain, Cydebot, Naniwako, Seraphim, Lamro, HoulihanLokey, ClueBot, Addbot, Dwgabbard, Whitepearl543, 8ung3st, Techdoctor, Xqbot, Jaeljojo, Helpful Pixie Bot, Juhuyuta and Anonymous: 19 4.2 Images File:Symbol_list_class.svg Source: http://upload.wikimedia.org/wikipedia/en/d/db/Symbol_list_class.svg License: ? Contributors: ? Original artist: ? File:Wall_Street_Sign_NYC.jpg Source: http://upload.wikimedia.org/wikipedia/commons/6/65/Wall_Street_Sign_NYC.jpg License: CC-BY-SA-3.0 Contributors: Own work Original artist: JSquish 4.3 Content license Creative Commons Attribution-Share Alike 3.0