Page 10 - MAC4861_2 Finance class slides part 2 - 2. Businesses In Difficulty (UNISA)
P. 10

BUSINESSES IN DIFFICULTY




            Businesses in difficulty







            • In addition, it is important that you understand the

                essence of financial distress.




            • Financial distress is a condition where a company

                cannot meet, or has difficulty paying off its financial


                obligations to its creditors as it falls due and


                payable.



            • The chance of financial distress increases when a


                firm has high fixed costs, illiquid assets, or revenues


                that are sensitive to economic downturns.








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