In simple words, the word restructuring means any changes in a company. Generally the word restructuring in the corporate world is used in economic downturns. One should have a good understanding about the restructuring process before going for it.ReorganizationIt is a clause in company charter which provides guides to merger and acquisition, change in ownership at corporate level, change in assets. Generally, reorganization includes mergers, amalgamations, divestitures, corporate buyouts etc.Usually, the companies go for reorganization to improve their efficiency, to increase their profits, reduce or eliminate financial troubles. Reorganization includes debt payments, restructuring company’s capital structure etc.Some of the reasons ... Read More

Organizational restructuring is a process of reorganizing ownership, operational and other structures of an organization to make an organization profitable. Internal factors or external factors or combination of both are responsible for organization restructuring.If the restructuring helps an organization to develop and grow, then it is called positive restructuring. If restructuring makes an organization stagnant or downfall, then it is called negative restructuring.Internal factorsExternal factorsTo decrease gross margin.New trends in the market.Lack of proper communications.New clients/customers.High cost of operating.Market redefines.Negative cash flows.Labor costs etc.Competitors etc.ReasonsThe reasons for organizational restructuring are as follows −Change in nature of business according to market ... Read More

Financial restructuring is a process of reorganizing companies’ financial structure. Companies’ financial structure consists of both debt and equity capitals. Reorganizing financial structure can be from the asset side or liability side of the balance sheet.Equity restructuringIn this restructuring, equity capital is reorganized by reshuffling shareholders’ capitals and reserves in the balance sheet. It is a complex process, as it involves law.MethodsSome of the methods of equity restructuring are as follows −Repurchasing shares from shareholders to reduce liability to shareholders and reduction in capital.Waiving off dues of shareholders.Share capital consolidation.Writing down share capital in appropriate accounting entries.ReasonsThe reasons of equity ... Read More

Financial restructuring is a process of reorganizing companies’ financial structure. Companies’ financial structure consists of both debt and equity capitals. Reorganizing financial structure can be from the asset side or liability side of the balance sheet.Debt restructuringIn this process, the debt capital of the company is reorganized by reorganising the items in the balance sheet. It is used as a company financial tool rather than equity restructuring because, financial manager looks to minimize the cost of capital by improving efficiency.Ways of debt restructuring are as follows −Change in debt part by using the market opportunities by low cost borrowings.Increase in ... Read More

Corporate restructuring is a process, where the entity modifies its capital structure or operations. Corporate restructuring is preferred, if there are significant problems in the financials of the corporation and to enhance their performances. Change in ownership is also one of the causes for corporate restructuring. Financial and legal experts are hired to assist in the process.ReasonsThe reasons for corporate restructuring are as follows −Change in strategy.No profits for a long time.Reverse synergy.More cash flow requirements.CharacteristicsThe characteristics of corporate restructuring are as follows −Improves balance sheet.Reduction of staff.Change in management.Disposing assets (underutilized).Outsourcing.Operational shift.Reorganizing functions.Labor contracts renegotiations.Debts rescheduling.AspectsThe aspects to consider ... Read More

To fund a merger and acquisition, the source of capital is required. To attain those funds is a complex thing because; it requires a lot of variations and combinations. Proper planning is required to get the capital for merger and acquisition. With various alternatives available, a proper mix is selected to get the low cost of capital.TypesThe types of acquisition financing are as follows −Stock swap − Acquirer exchange stock with the targeted company.Equity − Acquiring companies targets the companies which operate in an unstable industry with uneven cash flows.Cash − Takes place if an acquired company has smaller/low cash reserves.Debt − Banks ... Read More

Let us learn the concepts of liquidation and bankruptcy before understanding their differences.LiquidationLiquidation is the process of winding up a company by selling their assets and distributing them based on solvent or insolvent business. Liquidation occurs when a company decides or reaches a point when it decides not to continue their business for various reasons.The main reason to liquidate the asset is due to insolvency, where business reaches a point that it can’t pay the due payments. The person who manages the liquidation process is called a liquidator.TypesVoluntary liquidation (members) −Business able make payments but owner makes a choice to ... Read More

Deal structure is the binding agreement between companies, which outlines rights and obligations for both the companies. This agreement states about the entitlements and constraints of companies.In other words, deal structure is nothing but terms and conditions of a merger and acquisition. It prioritizes the objectives and the major priorities of both the companies are satisfied. Preparing a merger and acquisition deal is challenging and complicated.Process of deal structure is explained below −Negotiation stance.Latent risks and how they can be managed.Maximum risk can be tolerated.Conditions (negotiations may cancel).Some of the factors considered while preparing deal structure are as follows −Financing ... Read More

What is Comparative Financial Statements?Comparative financial statements provide a comparison between key financial metrics for two consecutive years. It is a very useful tool to check whether the company’s financials are moving in the right direction. It is a document that lists two or more years of financial performance of a company to offer a bird’s eye view of the comparison between two years of financial data. However, some caution must be taken while comparing the items in two financial statements.Analyzing Comparative Financial Statements is not tough as the interpretation of data does not require expert knowledge. However, in the ... Read More

What is Growth Rate?The growth rate of a company is its ability to grow using and investing whatever it has in its operations. The rate is a measure of the capability of a company to have an efficient mechanism of operations that could churns out more profits in two comparable situations.Like most other ratios, the growth rate is not useful when used alone. For the growth rate to be meaningful, two or more companies should be considered from the same industry. The growth rates of companies also depend on the circumstances that are related to the company’s business.For example, if ... Read More