What is a Period of financial distress?
A period of financial distress takes place when a company is struggling to meet financial obligations, either due to the company, an asset or an index of a set of assets declining in price or crashing in value.
Where have you heard about a period of financial distress?
A recent example of a period of financial distress is the financial crisis of 2007-2008, which began with a crisis in the US mortgage market that developed into a full-blown international banking crisis.
What you need to know about a period of financial distress.
Signs of period of financial distress can include poor company profits and a struggle to break even. These two conditions often lead the company to require external capital, which in turn raises the company's business risk and lowers its creditworthiness with lenders, banks and suppliers. When a company has limited access to funds, there is a high chance of company failure. Another cause of financial distress is when a company offers poor-quality products and services, which can lead consumers to start buying from competitors.