Definition of Financial distress:
Financial distress is a condition in which a company or individual cannot generate sufficient revenues or income, making it unable to meet or pay its financial obligations. This is generally due to high fixed costs, a large degree of illiquid assets, or revenues sensitive to economic downturns. For individuals, financial distress can arise from poor budgeting, overspending, too high of a debt load, lawsuit, or loss of employment.
An individual, business, or companys inability to generate revenue when there are too many debts.
Ignoring the signs of financial distress before it gets out of control can be devastating. There may come a time when severe financial distress can no longer be remedied because the company or individual's obligations have grown too high and cannot be repaid. If this happens, bankruptcy may be the only option.
How to use Financial distress in a sentence?
- Financial distress happens when revenues or income and no longer meet or pay for the financial obligations of an individual or organization.
- Financial distress is often a harbinger of bankruptcy, and can cause lasting damage to one's creditworthiness.
- In order to remedy the situation, a company or individual may consider options such as restructuring debt or cutting back on costs.
Meaning of Financial distress & Financial distress Definition