Financial Distress: Bankruptcy Essay -- Economy, CNN Money, Kmart

Halley 1 monetary Distress Bankruptcy Financial distress which results in nonstarter atomic number 18 very common for businesses in todays economy. According to CNN Money Fortune 500, Last yr marked the highest number of billon-dollar bankruptcies ever recorded. And corporate bankruptcies ready continued at an elevated clip, with about twice the number of businesses file for bankruptcies filing for bankruptcy protection in the 12 months ending June 2010, as they did during the same brush of time in 2008, 2007, or 2006. (Roane, 2010) It is very important for every financial talk termsr to acknowledge that bankruptcy can be a truth for any fellowship and financial managers have to know how to prevent it. most(prenominal) all companies have debts and these debts are use for financial leverage, but they have to be closely monitoring deviceed by the financial manager. Many monthly debts that companies are faced with are, making monthly payments to vendors, and paying employees. It is the financial managers to manage and monitor these debts, so that the debts dont become more than the equity. (Ross, Westerfield, & Jordan, 2010) Companies will be considered in financial distress when all of their liquidity has to be used to pay their outstanding debt. Companies can file bankruptcy to deal with and manage the lack of liquidity. When a company files bankruptcy the company is protected and bondholder or creditors cannot sue them for money that is owed. According to the authors of Fundamentals of Corporate Finance, In trader a firm becomes bankrupt when the value of its assets equals the value of its debt. (Ross... ...s trying to make out with Wal-Mart and Target on similar name brands, and prices, which became detrimental to Kmart. (CNN Money.com, 2002) According to CNNMoney.com Kmart filing included Kmart, w hich has about $37 jillion in annual revenue, verbalize it had secured $2 billion in debtor financing to pay its $1.6 billion in debt and expected to emerge from bankruptcy in about a year. (2002) Kmart wanted to emerge from restructuring with a new image that was totally distinguishable form their competitors and by filing bankruptcy and reorganizing their organizations they were able to do that. coating In order for a company to prevent any typecast of bankruptcy a company will need to keep its assets dismantle than his debt. It is important for financial managers of a company to manage a companys debt-equity ratios while still increasing leverage within the company.