Posted in Finance, Accounting and Economics Terms, Total Reads: 276
In financial respect also to turnaround means to change the fortune of a company. So a company which was performing poorly for a long time has turned around and is performing better. A dying company takes necessary steps to ensure that a turnaround happens.
A turnaround can also mean other things like, turning around of fortunes of a security from a downtrend to a uptrend or for to buy a security on a day and sell it on the same day. The turning around of a company can be divided into three categories:
a) Cost structure: Changing the cost structure or making it more efficient.
b) Management: Replacing the current management partially or try to improve its competencies.
c) Declining Market Position:
The company should check all the above things and then formulate a problem solving strategy; in some of the cases the best strategy would be to liquidate the company rather than saving it. Some of the characteristics that provide a indication that the company is in need for a turnaround are it is unable to cover its costs, inability to pay wages, payback its creditors and also inability to pay its shareholders. Also increased competition could have caused the consumers to perceive the products of the company to be of superior quality, causing it to lose its brand image and hence its market share.
Also a speculator or a investor could profit from a turnaround if he is able to predict the turnaround to perfection. So turnaround can be used by investors to have a substantial profit.