Financial Distress
Financial distress, reorganization and bankruptcy
You are required to explore, study and investigate the issues of financial distress, reorganization and bankruptcy of firms around the world, in particularly Malaysia and examined the factors that may have caused this phenomenon. Search for journal articles (at least 10) that are related to these topics and provide your comments and opinions in your write-up, not more than 10 pages.
Financial distress can be defined as situation in which a company can’t meet or faces difficulty paying off its due financial obligation to its creditors. Generally the chance of financial distress enhances when a firm has high fix cost and high leveraged, it has illiquid assets, or revenue are sensitive to economic downturn. A company under financial distress incurs related to the situation for instance, higher cost of financing, opportunity cost of projects and lower productivity and efficiency. The firm’s cost of borrowing additional capital increases as consequence making more expensive to raise needed capital. In effort to satisfy short-term obligations, management might pass on profitable long-term project.
Reorganization is process designed to revive a financially troubled or bankrupt firm. Reorganization process involves the restatement of assets and liabilities, in addition holding meeting with creditors in order to make new arrangements for maintain repayment. It is considered as an attempt to extend the life of distressed company.
Bankruptcy is a legal proceeding involving a person or business that is unable to repay outstanding debts. Asset belonging to debtor is evaluated and are used to repay outstanding debt. Before and insolvent company or person gets involved in insolvency proceeding it will likely be involved in more informal arrangement with creditor for instance making alternative payment arrangement. Insolvency can be result of poor cash management, reduction in forecasted cash flow or unexpected
You are required to explore, study and investigate the issues of financial distress, reorganization and bankruptcy of firms around the world, in particularly Malaysia and examined the factors that may have caused this phenomenon. Search for journal articles (at least 10) that are related to these topics and provide your comments and opinions in your write-up, not more than 10 pages.
Financial distress can be defined as situation in which a company can’t meet or faces difficulty paying off its due financial obligation to its creditors. Generally the chance of financial distress enhances when a firm has high fix cost and high leveraged, it has illiquid assets, or revenue are sensitive to economic downturn. A company under financial distress incurs related to the situation for instance, higher cost of financing, opportunity cost of projects and lower productivity and efficiency. The firm’s cost of borrowing additional capital increases as consequence making more expensive to raise needed capital. In effort to satisfy short-term obligations, management might pass on profitable long-term project.
Reorganization is process designed to revive a financially troubled or bankrupt firm. Reorganization process involves the restatement of assets and liabilities, in addition holding meeting with creditors in order to make new arrangements for maintain repayment. It is considered as an attempt to extend the life of distressed company.
Bankruptcy is a legal proceeding involving a person or business that is unable to repay outstanding debts. Asset belonging to debtor is evaluated and are used to repay outstanding debt. Before and insolvent company or person gets involved in insolvency proceeding it will likely be involved in more informal arrangement with creditor for instance making alternative payment arrangement. Insolvency can be result of poor cash management, reduction in forecasted cash flow or unexpected