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What is equity restructuring in financial restructuring?
61 Lectures 1 hours
43 Lectures 33.5 hours
Financial restructuring is a process of reorganizing companies’ financial structure. Companies’ financial structure consists of both debt and equity capitals. Reorganizing financial structure can be from the asset side or liability side of the balance sheet.
In this restructuring, equity capital is reorganized by reshuffling shareholders’ capitals and reserves in the balance sheet. It is a complex process, as it involves law.
Some of the methods of equity restructuring are as follows −
Repurchasing shares from shareholders to reduce liability to shareholders and reduction in capital.
Waiving off dues of shareholders.
Share capital consolidation.
Writing down share capital in appropriate accounting entries.
The reasons of equity restructuring are as follows −
To support management stakes.
Provide an exit mechanism.
To increase efficiency.
To erase accumulated losses.
Maintain debt-equity ratio.
Unrecognized expenditure writes off.
To raise new finance.
Revaluation of assets.
- What is debt restructuring in financial restructuring?
- What is corporate restructuring?
- What is organizational restructuring?
- What is the difference between reorganization and restructuring?
- Define equity shares used in financial management.
- What is the equity capitalization rate?
- What is Levered Cost of Equity?
- What is Financial Leverage?
- What is Financial Planning?
- What is opportunity cost of equity capital?
- What is the equity carve outs in divestitures?
- What is a Financial Ratio?
- What is free cash flow to equity (FCFE)?
- What is meant by a pure-equity firm?
- What is Risk Preference? (Financial Management)