Financial Distress Analysis

Financial distress analysis is the assessment of a company's financial health to determine if it is at risk of failing to meet its obligations. This involves examining financial statements, liquidity, debt levels, and cash flow. Analysts look for warning signs, such as declining revenues or increasing expenses, to foresee potential bankruptcies or defaults. Understanding these indicators helps investors, creditors, and managers make informed decisions, allowing them to take corrective actions or reevaluate their investments before it's too late. Essentially, it’s about gauging a company’s ability to survive financially under challenging conditions.