Financial Distress
Financial distress occurs when an individual or a business struggles to meet its financial obligations, such as repaying debts or covering regular expenses. This situation can arise from various factors like poor cash flow, unexpected expenses, or decline in revenue. When in financial distress, entities often face risks like bankruptcy, which is a legal process for individuals or businesses unable to repay their debts. Recognizing early signs of financial distress is crucial, as it allows for timely intervention, such as restructuring finances or seeking help to regain stability and prevent more severe consequences.
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Financial distress refers to a situation where an individual or organization struggles to meet their financial obligations, such as paying debts or covering essential expenses. This can arise from factors like reduced income, increased expenses, poor financial management, or economic downturns. In a business context, financial distress may lead to insufficient cash flow, risking insolvency or bankruptcy if not addressed. Recognizing early signs, like mounting debt or missed payments, is crucial for taking corrective actions and preventing more severe consequences.