Corporate Finance
Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
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Chapter 30, Problem 4CQ
Summary Introduction

To explain: Financial distress does not always cause firm to die.

Financial Distress

Financial distress is a situation where the funds or revenue generated by the company through its cash flow activities is not sufficient to meet its current business obligations. It is the situation when the firm is not being able to pay its debts because neither the operating nor financing and nor the investing activities of the company are able to meets its obligations and run its business smoothly. Therefore the acute shortage or lack of funds leads to financial vacuum being created in the firm which is known as financial distress.

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