Trouble ahead – Finding the value of an underperforming company
Abstract: Underperforming companies present special valuation challenges. Financial distress adds an element of risk, which lowers value. This article notes some of the warning signs of financial distress, including weak demand, scaled-back corporate budgets, tighter credit, recurring net losses and deteriorating liquidity. It also explains the techniques valuators are likely to use and how they determine whether liquidation or strategic value would be appropriate.