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Username: Peter

Rating:
Guru Stars

Asked to: Talitha Taslim

Date Created: 02 Sep 2015
Category 28
Tag Financial
Question What is delevereging?
Advice from Guru
Hi Peter,

Deleveraging is a term that comes into vogue following major economic meltdowns.

When companies overdue their use of leverage, they run into trouble as they are faced with excessive interest payments. That's when deleveraging - getting rid of debt - comes into play.

From a business perspective, deleveraging strengthens balances sheets. It is a sound course of action to get a company back on the right track. From a practical perspective, however, deleveraging isn't quite so pretty. Laying off workers, closing plants, slashing research and development budgets and selling off assets are all part for the course when implementing a deleveraging strategy as companies seek to retain extra cash in order to pay off their obligations.

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