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When To Begin Turnaround Initiatives

By Net Assets posted 02-25-2020 08:57 PM


(from FEI Daily) For organizations in early to mid-stage of decline, restructuring will be easier and more effective than similar efforts in later stages of decline. Three stages of decline can be described as such: 

    1. Early Stage Decline: Missed Projections, But Continued Liquidity. A turnaround takes time and money to enact. By understanding your access to liquid funds, you can begin to build a plan toward renewing and revitalizing your company.
    2. Middle Stage Decline: Default on Covenants. At this stage, an organization should be well aware of key financial indicators of its creditworthiness and predictors of bankruptcy. It’s still possible to have enough access to capital that you can use your services to maximize return.
    3. Late-Stage Decline: Major Default, No Liquidity, Customer Issues, Viability in Doubt. At this stage we often see management in denial—they don’t have a plan to fix their operations. They’ve stretched their balance sheet, and they’re simply too paralyzed to act. 

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