International Journal of Accounting Research

Abstract

Essay on Distress

Payal Chadha

This paper describes the state of distress, outlines major signs of distress, creates hypothesis about the potential sources of distress plausible for the project and the environment mentioned, and describes ways of eliminating the distress factors. Financial statements are the best source as selected financial ratios are used to calculate the distress level of the firms. Factors like the economic cycle, macroeconomic factors, and mismanagement of cash flows cause distress financially to the firms. To avoid distress, the best strategies are to restructure business operations, debt, financing and to maintain cash outflow and inflow using simple procedures.