FINANCIAL DISTRESS IN FIRMS
The financial managers of a firm in financial distress do not have the financial ability to meet scheduled payments, due to cash flow problems caused by declining asset values (Sun et al., 2014). Carlson, Lewis, and Nelson (2014) Stated that firms in financial distress inquire an increase in operational cost, which will affect the firm's financial performance.
The consequences of financial distress can be business problems such as increased accounting risk, asset risk, liability, and strategic risk (Rosenberg & Ferlie, 2014). These consequences of financial distress are disastrous, since they may lead to discontinuity of operations, increase of legal costs, administrative expenses, as well as other indirect costs (Carlson et al., 2014). Mazumder and Miller (2014) explained that apart from the adverse effects of financial distress on corporations, financial markets also suffer. It is, therefore, necessary to assess financial conditions of the firm from time (...) Read more? Sign up for free