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Managing Through Turbulent Times: The 7 rules of crisis management by Anthony Holmes

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11. Managing the balance sheet

Cash is more important than profit

In times of economic hardship lenders and advisers always encourage management to focus on cash generation. They are correct. In these conditions credit becomes tight and comparatively expensive and therefore there is less capacity for management to bridge short-term liquidity problems with additional borrowings.

Many solvent companies have failed because they are illiquid and unable to raise additional finance because lenders will not subordinate or share their existing collateral interests, and possible new lenders see the additional facilities as high risk if they are in a senior position and too high a risk if they are subordinated.

So what more, you may ask, needs ...

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