Financial Difficulties

What does financial difficulties mean?

Financial difficulties are conditions in which a company or individual cannot generate revenue or income because it is unable to meet or cannot pay its financial obligations.

This is generally due to high fixed costs, illiquid assets, or revenues sensitive to economic downturns.

This factor is also known as financial distress.

A broad overview of some early warning signs that your business may be experiencing financial difficulty (company has difficulty funding anything other than immediate debts):

  • late or missed payments to the bank;
  • company looks for new sources of funding;
  • employees are looking to leave or management structure is changing;
  • reporting obligations are missed; covenants are breached; accounts are not filed on time;
  • negative rumours in the market as to the viability of the company.

Bear in mind that financial problems do not make a company’s business a failure, every businesses experience growing pains and turning points.

Definition of finance

Finance is a broad term that describes activities associated with banking, leverage or debt, credit, capital markets, money, and investments.

Basically, finance represents money management and the process of acquiring needed funds.

Finance also encompasses the oversight, creation, and study of money, banking, credit, investments, assets, and liabilities that make up financial systems.

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Last edited on 6 January 2022.