Financial distress is a situation where a firm’s operating cash flows are not sufficient to satisfy current obligations, and the firm is forced to take corrective action

Strategies which are available for the company to deal with the financial distress cost are as follows-

A. Reducing the overall amount of debt capital on the books of accounts of company will be helpful in order to eliminate with the insolvency .

B. The company will also try to improve with the liquidity in the short term by eliminating the the higher amount of payments associated with debt interest.

C. There is a need for improvement of the overall cash conversion cycle which will be helpful in improving the the total amount of cash in hands of the company.

D. There is also a need for maximisation of the earnings of the company and return on income of the company because it will also ensure that there will be a lower risk associated with the default.

E. The company should also try to eliminate the theoff-balance sheet transaction to the largest possible level because it will help the company in order to eliminate the risk associated with financial distress.

F. The company should also try to reduce the dividend payment and share repurchases in order to have higher cash on hand.