Financial distress - Business concept of the day
Finance & Accounting
319 week ago — 1 min read
Definition: Financial distress refers to a financial condition in which a company cannot meet, honour or has difficulty paying its debts, or service its financial obligations to its creditors, which could be due to high fixed costs, illiquid assets, or revenues sensitive to economic downturns. If financial distress cannot be relieved, it can lead to bankruptcy
Example: The signs of financial distress scared existing investors who went on a massive selling spree to minimise the losses but exacerbated the crisis in the process.
Business Insight: There are several ways to cure financial distress. If high debt burden is the cause of financial distress, the company can undergo a debt restructuring.
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