Financial Restructuring
Most businesses go through a phase of financial restructuring at some point, though not necessarily to address shortfalls. In some cases, the process of restructuring takes place as a means of allocating resources for a new marketing campaign or the launch of a new product line. When this happens, the restructure is often viewed as a sign that the company is financially stable and has set goals for future growth and expansion.
A company may also need to restructure its finances if it merges with or acquires another company. When two firms merge, their debt and equity are also combined, and the resulting corporation may have a very different debt-to-equity ratio than either of the original companies. An acquisition may even be used as a form of financial restructuring, as a company with a low debt-to-equity ratio may target a business with a high ratio as a means of better balancing its finances.
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