Successful Or Distress

There are various things financial managers look at to determine whether the firm is successful or in distress. Financial managers analyze the firm’s cash flow statements when determining the health of the firm. There are a few indicators that show a company is in distress. It starts with the firm not being able to meet scheduled payments or when a firm’s projected cash flow implies it will soon be unable to meet scheduled payments (Brigham & Ehrhardt, 2020). Financial managers need to assess the situation and see if the cash flow problem is temporary and if the company will be able to recover. Analyzing a firm’s debt-to-equity ratio helps financial managers to gauge the company’s debt because it compares the firm’s long and short-term debt to its book value (McClure, 2019). If the firm has a high debt-to-equity ratio, that means the firm has a great deal of debt, unlike a firm with a low debt-to-equity which indicates the firm has little debt.

Financial managers can uncover a firm’s potential distress by performing routine audits of financial statements.

The past year has been hard on many businesses. The pandemic has forced a lot of business to have to close their doors due to the country’s shutdown. But there have also been many businesses that have been able to succeed during COVID-19. Supermarkets, in particular, have been thriving during the pandemic. With restaurant closures, many Americans who normally eat out had to stay home and make their own meals. Although there were stay-at-home orders in place, supermarkets were deemed as “essential”, allowing them to stay open during the shutdown (Arora, 2020). Also, people feared shortages of toilet paper, other paper products, and cleaning supplies, which in turn made them buy the prices of these products increased, but many still purchased them every chance they got while at the supermarket. Being that many feared shortages and the demand rising, supermarkets did not have to rely on coupons or promotions because customers were coming in regardless (Arora, 2020). Although Coronavirus hit many businesses hard, supermarkets were thriving during the pandemic.

References

Arora, R. (2020). Which companies did well during the coronavirus pandemic? Forbes. https://www.forbes.com/sites/rohitarora/2020/06/30/which-companies-did-well-during-the- coronavirus-pandemic/?sh=18204e7b7409

Brigham, E. F., & Ehrhardt, M. C. (2020). Financial management: Theory and Practice, 16^th Edition. Mason, OH: South-Western Cengage Learning

McClure, B. (2019). Financial ratios to spot companies in financial distress. https://www.investopedia.com/articles/financial-theory/10/spotting-companies-in-financial- distress.asp

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Successful Or Distress

What could a financial manager look at to determine whether his company is successful or in distress? Give an example of success or distress in today’s business world.