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Journal 11-11 - These industries put companies at a high...

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Aakash Shah 11/11/2010 Professor Reaves Introduction to business Defaulting companies have common warning signs that can help us from being fooled. A recent study was completed by the S&P and it looked at 99 companies that have defaulted more than once in the past 28 years and they found that these companies had some important things in common. The first and main factor to a companies defaulting is aggressiveness with which the organization approached financial policies. Basically companies that have eyes bigger than their stomachs are considered to be in this category. Another category includes insecure industries. Industries such as auto industry, movies and consumer products have a high number if defaults.
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Unformatted text preview: These industries put companies at a high risk of default due to their structures. Lastly a common warning sign was magnified risk. Basically an example of a magnified risk includes companies defaulting on loans during rescission. But you also have to remember sometimes companies can come back from the dead, a great example is Mitsubishi motors. Mitsubishi recovered from two defaults and now actively trades with a sizable associated market cap. But you should always keep an eye out for the warning signs, so you’re not fooled....
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