Thursday, March 5, 2009

The Coming Wave of Restructuring Charges

What do Whirlpool, Fiat, Sony, and Heinekin have in common? All took major restructuring charges recently, driving down profits that already were under pressure from the global economic slowdown. As the recession lasts longer and spreads farther, we'll see many more companies taking big restructuring charges.

What are restructuring charges and how do they affect the company's operating results and financial condition? This video gives a quick answer.

How do restructuring charges affect credit risk analysis? At the technical level, they complicate things by prompting us to make adjustments to important profitability, coverage, and leverage measures. At the fundamental level, they signal problems with unsustainable operating costs or overstated asset values or both.

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